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Business, 06.05.2021 20:50 tiannaetzel

Lion Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials $ 12 Direct labor $ 20 Variable manufacturing overhead $ 10 Fixed manufacturing overhead: supervisory salaries $ 2 depreciation of special equipment $ 3 allocated manufacturing overhead $ 6 Unit product cost $ 53 An outside supplier has offered to sell the company all of these parts it needs for $42 a unit. The special equipment has no resale value or alternative use. The $6 allocated manufacturing overhead cost being applied to the part would be applied to the company's other products if the part were purchased from the outside supplier. (1). What is the net total dollar advantage or disadvantage of purchasing the 10,000 units of the part rather than making it? Please show all calculations and label items clearly. (2). What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 10,000 units required each year?

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Lion Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit...
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