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Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Giada Company produces 19,000 units of a component...

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Accounting

Make-or-Buy Decision, Alternatives, Relevant Costs

Each year, Giada Company produces 19,000 units of a component part used in tablet computers. An outside supplier has offered to supply the part for $1.14. The unit cost is:

Direct materials $0.71
Direct labor 0.28
Variable overhead 0.06
Fixed overhead 2.00
Total unit cost $3.05

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Each year, Giada Company produces 19,000 units of a component part used in tablet computers. An outside supplier has offered to supply the part for $1.14. The unit cost is: Required: 1. What are the alternatives for Giada Company? Make the part in house or buy the part externally 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. Direct materials, direct labor and variable overhead List the relevant cost(s) of external purchase. 3. Which alternative is more cost effective and by how much? by $ Buying the part from the external supplier by s x

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