Without the excel simulation, the make-or-buy decision can be determined for Alanco, Inc. as follows:
Make Buy Difference
Direct materials per unit $4.00
Direct labor 6.00
Variable manufacturing
overhead 2.00
Total variable costs $12.00
Traceable fixed overhead 5.00
Total relevant costs $17.00 $21.00 $4.00
Additional cost of buying the component parts = $4,800 ($4 x 1,200)
Thus, Alanco, Inc. should continue to <u>make</u> the parts, as it is more cost-effective than buying from the outside supplier.
<h3>What is a make-or-buy decision?</h3>
A make-or-buy decision is a financial decision that decides if a product or part should be manufactured in-house or bought from outside suppliers.
The making of a make-or-buy decision depends on the relevant costs.
<h3>Question Completion:</h3>
Make Buy
Direct materials per unit $4.00
Direct labor 6.00
Variable manufacturing
overhead 2.00
Total variable costs $12.00
Traceable fixed overhead 5.00
Total $17.00
Fixed manufacturing
Common 8.00
Total costs $25.00 $21.00
Thus, the make-or-buy decision shows that Alanco, Inc. should continue to make the part instead of buying from the outside supplier.
Learn more about the make-or-buy decision at brainly.com/question/16955734
