Answer:
It is more convenient to outsource and rent the facilities.
Explanation:
Giving the following information:
The unit manufacturing costs of this part, assuming a production level of 6,100 units, are as follows:
Direct materials $ 4.50
Direct labor $ 4.00
Variable manufacturing overhead $ 3.20
Fixed manufacturing overhead $ 1.40
Total cost $ 13.10
The fixed overhead costs are unavoidable.
Assuming Cruise Company can purchase 6,100 units of the part from Suri Company for $ 14.20 each, and the facilities currently used to make the part could be rented out to another manufacturer for $ 24,000 a year.
Make in house= 6100*13.10= $79,910
Buy:
Purchase= 6,100*14.20= 86,620
Fixed costs= 6,100*1.40=8,540
Rent= 24,000 (-)
Total cost= $71,160
It is more convenient to outsource and rent the facilities.