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Posted: December 9th, 2019
10. Busby Company needs 10,000 units of a certain part to use in its production cycle. The following information is available: Costs incurred by Busby to make the part: Direct materials $15 Direct labor 12 Variable factory overhead 13 Fixed factory overhead 10 Total $50 Costs to buy the part from Thurco: $45 If Busby buys the part from Thurco instead of making it, Busby could not use the released facilities in another manufacturing activity. However, twenty percent of the fixed overhead would be avoided because one of the supervisors could be let go. (a) In deciding whether to make or buy the part, what are the relevant costs that Busby must consider. (b) What decision should Busby make?
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