Cruise company produces a part that is used in the manufacture of one of its products. the unit manufacturing costs of this part, assuming a production level of 6,100 units, are as follows: direct materials $ 4.50 direct labor $ 4.00 variable manufacturing overhead $ 3.20 fixed manufacturing overhead $ 1.40 total cost $ 13.10 the fixed overhead costs are unavoidable. assuming cruise company can purchase 6 comma 100 units of the part from suri company for $ 14.20 each, and the facilities currently used to make the part could be rented out to another manufacturer for $ 24,000 a year, what should cruise company do? (round intermediary and final calculations to the nearest cent.)

It is more convenient to outsource and rent the facilities.

Explanation:

Giving the following information:

The unit manufacturing costs of this part, assuming a production level of 6,100 units, are as follows:

Direct materials $ 4.50

Direct labor $ 4.00

Variable manufacturing overhead $ 3.20

Fixed manufacturing overhead $ 1.40

Total cost $ 13.10

The fixed overhead costs are unavoidable.

Assuming Cruise Company can purchase 6,100 units of the part from Suri Company for $ 14.20 each, and the facilities currently used to make the part could be rented out to another manufacturer for $ 24,000 a year.

Make in house= 6100*13.10= $79,910

Buy:

Purchase= 6,100*14.20= 86,620

Fixed costs= 6,100*1.40=8,540

Rent= 24,000 (-)

Total cost= $71,160

It is more convenient to outsource and rent the facilities.

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