Question No. 2 (15 minutes) Cutler Company currently buys 30,000 units of a part used...
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Question No. 2 (15 minutes) Cutler Company currently buys 30,000 units of a part used to manufacture its product at a cost of $76 per unit. The supplier recently informed Cutler Company that a 20 percent price increase will take effect next year. Cutler has some additional space and could produce the units for the following per-unit costs (based on 30,000 units): Direct materials Direct labor Variable manufacturing overhead $32 $24 $24 If Cutler purchases the units from the supplier, Cutler can rent out the plant for $40,000 per year. Required: w a)Using differential/incremental analysis, calculate whether Should Cutler Company buy the part externally or make it internally. b)State your conclusion as to whether Cutler should purchase the part externally or produce the part internally
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