Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $37 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost Unit-level labor cost Unit-level overhead Batch-level set-up cost (6,000 units per batch) Product-level supervisory salaries Allocated facility-level costs $6 $5 $4 $48,000 $49,000 $43,000 The company expects an annual need for 6.000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $3,800 a month. If the company decides to make the parts, total costs will be:

Ahrends Corporation makes 43,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 12.80 23.30 2.10 26.50 $ 64.70 An outside supplier has offered to sell the company all of these parts it needs for $51.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $301,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $23.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…

Lean Mfg: Vintage Audio Inc

Sheridan, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 7 9 $27 Saran Company has contacted Sheridan with an offer to sell it 5400 wickets for $21 each. Of Sheridan's $9 per unit fixed cost, $5 per unit is unavoidable. Should Sheridan make or buy the wickets and why? O Make because the cost savings is $16200 O Make because the cost savings is $5400 O Buy because the cost savings is $10800 O Buy because the cost savings is $5400