Sycamore Company uses a certain part in its manufacturing process that it buys from an outside supplier for $29 per part plus another $4 for shipping and other purchasing-related costs. The company will need 14,400 of these parts in the next year and is considering making the part internally. After performing a capacity analysis, Sycamore determined that it has sufficient unused capacity to manufacture the 14,400 parts but would need to hire a manager at an annual salary of $43,200 to oversee this production activity. Estimated production costs are determined to be:
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| Direct material |
$ |
18 |
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| Direct labor |
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8 |
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| Variable overhead |
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4 |
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| Fixed overhead (includes manager at $3 per unit) |
|
7 |
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| Total unit cost |
$ |
37
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