Illinois Equipment Corporation is currently manufacturing

a part that goes #8055

Illinois Equipment Corporation is currently manufacturing a part that goes into its main product.
Each year 6,000 of these parts are used. Cost data for the past year that relates to the 6,000
parts are given below. Fixed costs are allocated on the basis of direct labor hours. An outside
company has offered to supply the part for $69 per unit, plus a shipping charge of $6 per unit.
The plant now used by Illinois to manufacture the part would not be used to capacity within the
foreseeable future if the part is purchased outside.Variable costs:Direct materials
..................................... $240,000Direct labor .......................................... 180,000Variable
overhead costs ........................... 18,000Fixed overhead costs ...............................
30,000INSTRUCTIONS1. Prepare an analysis comparing the unit cost of manufacturing the part
with the unit cost of purchasing it.2. What other factors are important in making the decision to
accept or reject the offer?Analyze: What is the highest cost that Illinois Equipment Corporation
should consider to pay for the part in an outside purchase?View Solution:
Illinois Equipment Corporation is currently manufacturing a part that goes

ANSWER
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