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Should abc co make or buy the subassemblies

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Reference no: EM132690772

ABC Co. currently manufactures a subassembly for its main product. The costs per unit are as follows:

Direct materials $1,

Direct labour $10,

Variable overhead $5,

Fixed overhead $8.

XYZ Co. has contacted ABC Co. with an offer to sell it 4,000 of the subassemblies for $17/ unit. If ABC Co. buys the subassemblies, $2 of the fixed overhead per unit will be allocated to other products.

Problem 1: Should ABC Co. make or buy the subassemblies?

Reference no: EM132690772

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