Make-or-Buy Decision.
Response to the following problem:
The Weaver Products Company, Inc. produces a product at $.51 variable cost per unit plus $.21 for overhead expenses when manufacturing 50,000 such units. A supplier offers to furnish the identical unit for $.60 each. An analysis of some of the costs incurred in the past to produce the unit indicates:
Direct materials $13,000
Direct labor... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12,000
Payroll taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480
Supervision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Payroll taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
It was further ascertained that the materials unit cost would increase $.03 per unit. The Weaver Company has projected next year's sales to be 75,000 units.
Required:
(1) A decision whether (a) to buy or (b) to make.
(2) Intangible factors to be considered in addition to a cost analysis to arrive at a sound make-or-buy decision.