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Burt company makes a product that includes a component part


Burt Company makes a product that includes a component part, Item XJ7. Presently, the company purchases XJ7 from an outside supplier for $48 each. Burt Company is considering manufacturing XJ7 itself. Estimated total manufacturing costs for the yearly requirement of 1,000 units of XJ7 follow. Burt anticipates producing XJ7 in 5 batches.

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Required:

  •  
    • A.        Should Burt Company make or buy component XJ7?
    • B.        If the company could reduce the number of batches needed from 5 to 2, would your answer change? Why or why not?
    • C.        Discuss the additional factors Burt should consider before making this decision.

 

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Financial Accounting: Burt company makes a product that includes a component part
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