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Kane Company is considering outsourcing a key component

Kane Company is considering outsourcing a key component
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Price: $9.99
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ACCOUNTING

5-33 Make-or-buy
Kane Company is considering outsourcing a key component. A reliable supplier has quoted a price of $64.50 per unit. The following costs of the component when manufactured in-house are expressed on a per-unit basis:

Direct materials $23.40
Direct Labor 16.10
Unit-related support 14.70
Batch-related support 9.80
Product-sustaining support 2.20
Facility-sustaining support 6.90
Total costs $73.10

a. What assumptions need to be made about the behavior of support costs for Kane?
b. Should Kane Company outsource the component?
c. What other factors are relevant for this decision?

 

FILE: MS WORD

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