e. Make vs. Buy (Sourcing Decision) Eggers Company needs 20,000 units of a part to use inproducing one of its products. If Eggers buys the part from McMillan Company for $90 insteadof 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 Mickey’s decision.The cost data are as follows:Cost to make the part:Direct materials $35Direct labor 16Variable overhead 24Fixed overhead 20$95Required1. Determine which alternative is more attractive to Eggers, and by what amount.2. What strategic factors might bear upon the ultimate decision?f. Short-Term Product-Mix Decision DVD Production
e. Make vs. Buy (Sourcing Decision) Eggers Company needs 20,000 units of a part to use in
producing one of its products. If Eggers buys the part from McMillan Company for $90 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 Mickey’s decision.
The cost data are as follows:
Cost to make the part:
Direct materials $35
Direct labor 16
Variable overhead 24
Fixed overhead 20
$95
Required
1. Determine which alternative is more attractive to Eggers, and by what amount.
2. What strategic factors might bear upon the ultimate decision?
f. Short-Term Product-Mix Decision DVD Production
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