Beto Company pays $6.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $7.20 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should Make Buy
Beto Company pays $6.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $7.20 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should Make Buy
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vikram
Transcribed Image Text:Beto Company pays $6.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is
considering making the part. Making the part would cost $7.20 per unit for direct materials and $1.00 per unit for direct labor. The
company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part
would be 80% of direct labor cost.
(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.)
(b) Should Beto make or buy the part?
(a) Make or Buy Analysis
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Cost difference
(b) Company should
Make
Buy
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