The management of Gill Corporation is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called FIZBE, is a component of the companyâ€™s finished product.
The following information was collected from the accounting records and production data for the year ending December 31, 2014.
1. 5,000 units of FIZBE were produced in the Machining Department.
2. Variable manufacturing costs applicable to the production of each FIZBE unit were: direct materials $4.75, direct labor $4.60, indirect labor $0.45, utilities $0.35.
3. Fixed manufacturing costs applicable to the production of FIZBE were: