National Hospitality Supply Co. has traditionally manufactured a number of different standard items for hotels...
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Accounting
National Hospitality Supply Co. has traditionally manufactured a number of different standard items for hotels and motels. It is now exploring an outsourcing decision for Coffe Machine that it currently produces. Cost information for one such machine part is given below:
Variable cost/unit
$
37.50
Fixed manufacturing costs (total)
4,580.00
Allocated corporate overhead
6,220.00
Unit product cost (based on 500 units)
$
59.10
Fifty percent of the fixed manufacturing costs are directly traceable to this specific machine and therefore avoidable. An outside supplier will sell the Machine at a price of $54 per unit if 500 units are purchased.
Required:
Prepare an analysis whether National Hospitality Supply Co. continue to manufacture Coffee Machine or whether it should purchase them from the outside supplier (Negative amounts should be indicated by a minus sign. Round "Per Unit" to 2 decimal places.)
Should the company make or buy?
multiple choice
Make
Buy
Answer & Explanation
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