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The Crown Company must decide whether to make or buy part 128PC. Although Crown's idle equipment could be used to produce up to 10,000 units of the part, the company presently needs only 7,000 units. The following shows the estimated cost of making part 128PC. Reuten Company will sell part 128PC to the Crown Company for $20 per unit.
Required: Determine whether Crown should make or buy the part, and explain why.
Job-Order Costing
A cost accounting system that assigns manufacturing costs to an individual product or batch of products, making it possible to track the cost of specific jobs.
Machine-Hours
A measure of production time, used as a basis for allocating manufacturing overhead costs based on the number of hours machines are operated.
Job M598
A specific production or project task within a job order costing system, identified by the code M598 for tracking its associated costs and progress.
Unit Product Cost
The total cost to produce one unit of product, including materials, labor, and overhead.
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