FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Kando Company currently pays $14 per unit to buy a part for a product it manufactures. Instead, Kando could make the part for per unit
costs of $6 for direct materials, $4 for direct labor, and $2 for incremental overhead. Kando normally applies overhead costs using a
predetermined rate of 200% of direct labor cost.
(a) Prepare a make or buy analysis of costs for this part.
(b) Should Kando make or buy the part?
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Company should:
Make
Buy
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Transcribed Image Text:Kando Company currently pays $14 per unit to buy a part for a product it manufactures. Instead, Kando could make the part for per unit costs of $6 for direct materials, $4 for direct labor, and $2 for incremental overhead. Kando normally applies overhead costs using a predetermined rate of 200% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (b) Should Kando make or buy the part? Direct materials Direct labor Overhead Cost to buy Cost per unit Company should: Make Buy
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