36. Lasso Corporation manufactures Part B89 in its internal processing division.

Question

36. Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 12,000 units of Part B89 annually. The annual cos units include: Direct materials Direct labor Variable manufacturing overhead $4.30 Fixed manufacturing overhead $3.00 Total cost All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase 12,000 units of the part from the Nadal Parts Company for $20.30 each, and the facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year, what should Lasso do? ts to produce Part B89 at the level of 12,000 $3.30 $8.20 $18.80 A.Buy the part and save $8.80 per unit. C B.Make the part and save $2.83 per unit C.Make the part and save $8.80 per unit D.Buy the part and save $2.83 per unit.

Explanation / Answer

36 Per unit Total Make Buy Make Buy Direct materials 3.3 39600 Direct labor 8.2 98400 Variable manufacturing overhead 4.3 51600 Opportunity cost 20000 Purchase cost 20.3 243600 Total 209600 243600 Savings per unit for making=(243600-209600)/12000= $2.83 Option B is correct

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