Make or buy decision

Make or buy decision - 3. If the company is interested in...

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Make or buy decision 1. A B The variable costs: Direct materials $1.50 1.50 X .20= 1.20 Direct Labor 1.00 1.00 X .10= .90 Variable manufacturing overhead 0.30 .80-.50=. 30 x .90= .27 Purchase of cartridges .00 .48 Total variable Cost per box $ 2.80 $ 2.85 I believe the company should reject the purchase of the outside supplies. It would be cheaper to produce a box of pens. It would be cheaper by .05 per box. 2. The maximum amount that the company should be willing to pay should be .43 per box because it would only cost .43 internally to produce the product.
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Unformatted text preview: 3. If the company is interested in the offer because of limited capacity, I would suggest that the company produce the 100,000 boxes at 2.80 per box for a total of $280,000 and purchase 50,000 boxes at 2.85 per box for a total cost of $142,500 in order to meet demand. 4. The factors that Bronson should take into account are Will the company be able to meet demand? Will the outsource company be reliable? Will the company be able to make a profit in the long run?...
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This note was uploaded on 07/07/2011 for the course BUS 600 taught by Professor Lee during the Spring '11 term at Troy.

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Make or buy decision - 3. If the company is interested in...

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