Stoltenberg Corp currently manufactures a part for one of its products. However, management is considering buying this part from an outside supplier instead. Management hasput together the first two columns in the incremental analysis table below:MakeBuyDirect Materials$112,000$0Direct Labor$138,000$0Variable MOH$54,000$0Fixed MOH$75,000$37,000Purchase Price$0$348,000Based on this information, should Stoltenberg Corp make or buy the part?Buy the part.Make the part.Cannot be determined.

Based on the incremental analysis, Stoltenberg Corp should opt to buy the part from an outside…

Answered: Stoltenberg Corp currently manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company XYZ is conducting an engineering economic analysis to decide whether to make vs purchase position for a necessary element needed ins several products. Now the engineering department has established this information: Option A to purchase 10,000 units annually at a fixed price of $8.50 per unit. The cost of placing the order is insignificant as per the present cost accounting procedure. Option B to manufacture 10,000 units annually with a direct labor cost of $1.50 per unit, manufacturing overhead cost is allotted at 200% of direct labor (which is $3.00 per unit) ) and Direct materials cost at $5.00 per unit. Based on the information, should the unit be purchased or manufactured?
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