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Thunder company has been producing 15000 units of part 3741 for its products. The unit cost for the part is as follows:
Direct materials 7Direct Labour 13Variable manufacturing overhead 9Fixed manufacturing overhead 10Total 39
Thunder can purchase 15000 units of part 3741 for $ 34 each. If the part is purchased, Thunder can make another product and provide a contribution margin of $15000. If the part is purchased, 75% of the fixed manufacturing overhead costs will still be incurred.
Problem 1: Should Thunder make or buy the part and why ?
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