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Han Products

Annual Production 30,000

Direct Materials $3.60


Direct Labor $10.00
Variable Manufacturing Overhead $2.40
Fixed Manufacturing Overhead $9.00
Total Cost per Part $25.00

Outside Supplier's Price $21


Rental of Facilities $80,000
Unavoidable Fixed Manufacturing Overhead 0.67

Total Fixed Manufacturing Overhead (at 30,000 units) $270,000.00


Unavoidable $180,000.00

Item Make Buy


Direct Materials ($108,000.00)
Direct Labor ($300,000.00)
Variable Manufacturing Overhead ($72,000.00)
Fixed Manufacturing Overhead ($270,000.00) ($180,000.00)
Purchase Price ($630,000.00)
Rental Proceeds $80,000
Total Costs ($750,000.00) ($730,000.00)

Difference in Favor of "Buy the units" $20,000.00


Therefore, they should buy the units