Austin LTD. Manufactures a component that is used in the fans it produces. A sup

Question

Austin LTD. Manufactures a component that is used in the fans it produces. A supplier has offered to supply the component for $25 per part. The annual requirements of Austin are 20,000 components. Austin's cost detail of manufacturing the component is as follows: 5. per unit $9 $5 $1 direct materials direct labor variable overhead depreciation of equipment supervisor's salary general factory overhead total $3 $2 $10 $30 It was determined that the special equipment has no resale value and cannot be used for another process. The factory overhead is an allocation and would be unaffected by the decision. The costs above are based on the same 20,000 units that the supplier would supply. Should Austin continue to manufacture the component or purchase it from the outside supplier? (Support your work with numbers.)

Explanation / Answer

I am solving one question here
5)cost associated with manufacturer of the component
=diretc materia+direct labour+var overhead+dep equipment+sup salary
=9+5+1+3+2=20
if we purchase from outside we get it for 25 which is higher than the manufacturing cost

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