Xia Co. currently buys a component part for $6 per unit. Xia believes that makin

Question

Xia Co. currently buys a component part for $6 per unit. Xia believes that making the part would require $2.35 per unit of direct materials and $1.05 per unit of direct labor. Xia allocates overhead using a predetermined overhead rate of 225% of direct labor cost. Xia estimates an incremental overhead rate of $0.60 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? Make Buy

Explanation / Answer

1a Per unit Make 4 =2.35+1.05+0.6 Buy 6 b Make

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