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adi47
adi47
05.11.2020 • 
Mathematics

You manage a large multi-national business that manufactures/builds commercial airliners. In an effort to reduce costs, you are considering outsourcing some of the parts used to build the planes. You start with the parts that are used most often. We will call these “A” parts. The estimated costs of producing 8,000 “A” parts in house are: Per Unit Total Direct Materials $13 $104,000 Direct Labor 10 80,000 Applied Variable Factory Overhead 11 88,000 Applied Fixed Factory Overhead 15 120,000 $49.00 $392,000.00 You can buy this part from a supplier overseas for only $41.49 each. You have never worked with this supplier before, but the price difference appears as if it could save your organization some money. If you purchased from the supplier, 50% in fixed factory overhead would be saved. (NOTE: Keep in mind that Fixed overhead is overhead you must pay even if the factory is not producing anything!) Using Excel, perform the calculations necessary to determine if you should make or buy.

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