1. Make-or-Buy Mattel is trying to decide whether to continue packaging the American Girl doll...
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1. Make-or-Buy Mattel is trying to decide whether to continue packaging the American Girl doll in-house or outsource the packaging process to an external supplier. Mattel's packaging costs for the dolls are: Internal Cost of Packaging 200,000 American Girl Dolls Packaging Materials Packaging Direct Labor Indirect Materials Packaging Supervision Other Fixed MFG Overhead Total Packaging Cost Annual Cost $ 300,000 90,000 60,000 50,000 200,000 $ 700,000 Unit Cost 1.50 0.45 0.30 0.25 1.00 3.50 . + The outside supplier bid $3.00 per doll for the packaging work. The agreement with the outside supplier includes a 3-year contract for a minimum of 200,000 units per year. All costs directly related to the packaging activities, including all direct and indirect materials, labor, and supervision, would be avoided if the packaging is outsourced. Other total fixed manufacturing overhead costs would remain unchanged. The factory space that is now used for packaging could be used to expand production of a popular product line. The expansion would generate an additional $150,000 in profit per year. Should Mattel outsource the packaging
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