Xia Co. currently buys a component part for $7 per unit. Xia believes that makin

Question

Xia Co. currently buys a component part for $7 per unit. Xia believes that making the part would require $3.35 per unit of direct materials and $1.10 per unit of direct labor. Xia allocates overhead using a predetermined overhead rate of 245% of direct labor cost. Xia estimates an incremental overhead rate of $0.55 per unit to make the part. 1-a. What are the relevant costs for Xia to make or buy the part? (Round your answers to 2 decimal places.) Per Unit Make Buy 1-b. Should Xia make or buy the part? O Make Buy

Explanation / Answer

1a Per unit Make 5 =3.35+1.1+0.55 Buy 7 1b Make

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