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    Analysis to figure out if I should make or buy

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    Knox Manufacturing incurs unit costs of $15 ($9 variable and $6 fixed) in making a subassembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $11 per unit. If the offer is accepted, all variable costs and $1 of fixed costs per unit will be saved.

    Instructions

    (a) Prepare an analysis to show whether Knox Manufacturing should make or buy the assembly part.
    (b) Would your answer be different if Knox could earn $25,000 of income with the facilities currently used to make the part?

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    Solution Preview

    Problem: Knox Manufacturing incurs unit costs of $15 ($9 variable and $6 fixed) in making a subassembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $11 per unit. If the offer is accepted, all variable costs and $1 of fixed costs per unit will be saved.

    Instructions

    (a) Prepare an analysis to show whether ...

    Solution Summary

    This solution conducts analysis to figure out if one should make or buy. The explanation is provided in an Excel spreadsheet.

    $2.19

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