QUESTION 6 (14 marks) Mason Company is currently manufacturing part 347, producing 8,000 units annually....
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QUESTION 6 (14 marks) Mason Company is currently manufacturing part 347, producing 8,000 units annually. The part is used in the production of several products made by Mason. The cost per unit for 34Z is as follows: Direct materials $6.00 Direct labour 3.00 Variable overhead 2.00 Fixed overhead 2.50 Total $13.50 Of the total fixed overhead assigned to 347, $4,800 is direct fixed overhead and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Mason for $12. There is no alternative use for the facilities currently used to produce the part. REQUIRED: (a) Should Mason Company make or buy part 34Z if the company would like to minimise total relevant costs? (b) What is the maximum price Mason would be willing to pay an outside supplier
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