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Exercise 11-10 Make or Buy Decision (LO11-3) Futura Company purchases the 55,000 starters that it...

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Exercise 11-10 Make or Buy Decision (LO11-3) Futura Company purchases the 55,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.20 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.00 as shown below. Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total production cost Per Unit Total $6.00 3.00 1.70 $ 93,500 1.00 $ 55,000 0.70 0.60 $ 33,000 $13.00 Futura decides to make the starters, a supervisor would have to be hired (at a salary of $93,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The totalrent on the plant is $82,000 per period. Depreciation is due to obsolescence rather than wear and tear Required: What is the financial advantage disadvantage) of making the 55,000 starters instead of buying them from an outside supplier

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