Snipe Company Has Been Purchasing a Component, Part Q for $19.20

question 67

Essay

Snipe Company has been purchasing a component, Part Q for $19.20 per unit. Snipe is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows:
Direct materials$11.50
Direct labor
4.50
Variable factory overhead
1.12
Fixed factory overhead
3.15
Total$20.27
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.

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Definitions:

Receiving Process

The sequence of actions taken to accept goods into a storage facility, including inspection, documentation, and stocking.

Bill of Lading

A legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being carried.

Shipper and Carrier

A shipper is a person or company sending goods; a carrier is the party responsible for the transport of those goods.

Contract

A legally binding agreement between two or more parties that is enforceable by law.