Walters Industries Manufactures a Product Which Contains Part XYZ The Required Volume of Output to Produce the Parts Will

question 10

Essay

Walters Industries manufactures a product which contains part XYZ. The company has always purchased this part from a supplier for $70 each. Walters recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the part instead of buying it. The company prepared the following per unit cost projections of making the part, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 60% of direct labor cost. $\begin{array}{lr}\text { Direct materials } & \$ 52.00 \\\text { Direct labor } & 16.00 \\\text { Overhead (fixed and } & \underline{9.60} \\\text { variable) } & \\\text { Total } & \underline{\$ 77.60}\end{array}$
The required volume of output to produce the parts will not require any incremental fixed overhead. Incremental variable overhead cost is $4.50 per part. Should Walters make or buy the parts?

---

Definitions:

Autonomy

The capacity and freedom to make one's own choices and decisions independently, often associated with self-governance.

School Schedule

The structured plan that outlines the timing and sequence of classes or events within an educational institution.

Psychological Empowerment

The process of increasing personal feelings of influence, competence, and autonomy, enhancing individual capacity to act on one's environment.

Meaningfulness

The value of work tasks in line with a person’s own self-concepts and ideals.