Cardianl Company needs 20,000 units of Part K28 to use in its production cycle.

Question

Cardianl Company needs 20,000 units of Part K28 to use in its production cycle. The following information is available: Cost to Cardinal to make Part K28: Direct Materials $4 Direct manufacturering labor 16 Variable overhead allocated 8 Fixed overhead allocated 10 Total Costs $38 Cardinal can buy the part from Oriole Corp. at a price of $36 each. Should Cardinal make or buy Part K28? (Show your Computations) Cardianl Company needs 20,000 units of Part K28 to use in its production cycle. The following information is available: Cost to Cardinal to make Part K28: Direct Materials $4 Direct manufacturering labor 16 Variable overhead allocated 8 Fixed overhead allocated 10 Total Costs $38 Cardinal can buy the part from Oriole Corp. at a price of $36 each. Should Cardinal make or buy Part K28? (Show your Computations)

Explanation / Answer

Calculate total relevant cost :

Cardinal should make the part K28.

Make Buy Direct material 80000 Direct labour 320000 Variable overhead 160000 Purchase cost 720000 Total 560000 720000

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