Reference no: EM133025723

Question - Dolly Car Productions manufactures a part for use in its production of automobiles. When 1,000 items are produced, the costs per unit are:

Direct Materials $12

Direct manufacturing Labor 60

Variable manufacturing Overhead 24

Fixed Manufacturing Overhead 30

Total $ 126

Monty Company has offered to sell Dolly Car Productions 1,000 units of the part for $122 per unit. The plant facilities could be used to manufacture another part at a savings of $12,000 if Dolly Car accepts the supplier's offer. In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated.

Using a Make versus Buy analysis, what alternative is best for Dolly Car Productions? Type your work below and clearly indicate whether the firm should Make or Buy the part. By how much better off will the firm be using your decision?

Given the information for Dolly Car Productions above, what is the maximum per unit price that Dolly Car should be willing to pay for these parts?