QS 25-12 Decision To Ad X Cezto.mheducation.com/hm.tpx 0.90 points QS 23-8 Make

Question

QS 25-12 Decision To Ad X Cezto.mheducation.com/hm.tpx 0.90 points QS 23-8 Make or buy LO At Xia Co. currently buys a component part for S8 per unit Xia believes that making the part would require $5.40 per unit of direct materials and $1.05 per unit of direct labor. Xia alocates overhead using a 50.55 per unit to make the part 1.a. What are the relevant costs for Xia to make or buy the part? (Round your answers to 7 decimal ined overhead rate of 220% of direct labor cost Xia estimates an incremental overhead rate of places.) er Make Buy 1.b. Should Xia make or buy the part? Make Buy ReferenceseBook & Resources oimcuty Worksheet Qs 23-8 Make or buy LO A1 OType here to search

Explanation / Answer

Relevant cost to buy = $ 8

Relevant cost to make = ( 5.4 + 1.05 + 0.55 ) = $ 7

Allocated Overhead are irrelevant as they will continue to occur whether the product is bought or made, therefore, only incremental Overhead is relevant.

Xia should make the part.

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