Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.70 for direct materials and $1.25 for direct labor. Incremental overhead to make this part is $1.60 per unit. The company can buy the part for $4.80 per unit. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Gelb make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Make Buy Cost difference (b) Company should:

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.70 for direct
materials and $1.25 for direct labor. Incremental overhead to make this part is $1.60 per unit. The company can buy the part for $4.80
per unit.
(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.)
(b) Should Gelb make or buy the part?
(a) Make or Buy Analysis
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Cost difference
(b) Company should:
Make
Buy
Transcribed Image Text:Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.70 for direct materials and $1.25 for direct labor. Incremental overhead to make this part is $1.60 per unit. The company can buy the part for $4.80 per unit. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Gelb make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should: Make Buy
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