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Should component be purchased from market and discuss

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Reference no: EM132637594

The estimated costs of producing 6,000 units of a component are:

                        Per Unit

Direct Material $10

Direct Labor        8

Applied Variable Factory Overhead  9

Applied Fixed Factory Overhead 12

$1.5 per direct labor dollar

The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved.

Required:

Question 1: Should the component be purchased from the market?

Question 2: Being a production manager, provide your logical opinion on choosing between purchasing the component from market or producing in-house

Reference no: EM132637594

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