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Kadhim Co. manufactures product B which is a part of its main product. Kadhim Co...

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Accounting

Kadhim Co. manufactures product B which is a part of its main product. Kadhim Co makes 50,000 units of product B per year. The production costs are detailed below. An outside supplier has offered to supply 50,000 units of product B per year at $ 2.45 each. Fixed production cost of $ 40,000 associated with the product B are unavoidable. Should Kadhim Co make or buy the product B?

The production cost per unit for manufacturing a unit of product B are:

Direct Materials

0.85

Direct Labor

0.65

Variable Manufacturing Overhead

0.40

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