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    Coyle Comp.: Make or Buy the Component Part

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    3. Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:

    Direct materials $35,000
    Direct labor 15,000
    Variable manufacturing overhead 10,000
    Fixed manufacturing overhead 20,000
    $80,000

    Another company has offered to sell the same component part to the company for $12 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Coyle Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $14,000.

    Instructions
    Should Coyle Company Make or Buy this component part?

    © BrainMass Inc. brainmass.com October 10, 2019, 2:31 am ad1c9bdddf
    https://brainmass.com/business/accounting/coyle-make-buy-component-part-381084

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    3. Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:

    Direct materials $35,000
    Direct labor 15,000
    Variable manufacturing overhead 10,000
    Fixed manufacturing overhead 20,000
    $80,000

    Another company ...

    Solution Summary

    The solution discusses if the Coyle Comp. should make or buy the component part.

    $2.19