Silverado Company needs 3,000 special cinches for a saddle that it designs and manufactures. If...
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Silverado Company needs 3,000 special cinches for a saddle that it designs and manufactures. If the company buys the cinches from another company, it will have idle capacity in its plant that cannot otherwise be used. The company factory space is sufficient to make the cinch if that is the logical choice. Indirect fixed manufacturing overhead is 20% and will be incurred whether the buckles are purchased or manufactured by the company. The relevant costs of making and buying the cinches are as follows: Cost to make the cinches: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead (direct and indirect) $ 8 13 5 5 $33 Cost to buy from a cinch company $31 a. b. Identify the differential costs of making the cinches. Should the cinches be purchased or manufactured? Explain your
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