Make vs. Buy (Sourcing Decision) Eggers Company needs 37,000 units of a part to use...
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Make vs. Buy (Sourcing Decision) Eggers Company needs 37,000 units of a part to use in producing one of its products. If Eggers buys the part from McMillan Company for $100 instead of making it, Eggers will not use the released facilities in another manufacturing activity. Forty percent of the fixed overhead will continue irrespective of CEO Donald Mickeys decision. The cost data are as follows:
Cost to make the part:
| Direct materials | $ 37 |
|---|---|
| Direct labor | 20 |
| Variable overhead | 28 |
| Fixed overhead | 20 |
| $ 105 |
Required:
1. Determine which alternative is more attractive to Eggers, and by what amount.
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