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Question - Laskowski Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 4.00
Fixed factory overhead 2.00
Total costs $14.00
The fixed factory overhead costs are unavoidable. Hendricks Company has offered to sell 5,000 units of the same part to Laskowski Company for $14 per unit. The facilities currently used for the part could be used to make 5,000 units annually of a new product that would contribute $5 a unit to fixed expenses. No additional fixed costs would be incurred with the new product. A) Make or Buy? B) How much will be saved?
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