Bell Company must decide whether

PROBLEM #2 – MAKE OR BUY DECISION (2 pts.)
Bell Company must decide whether to make or buy subassembly XYZ. Bell
Company needs 10,000 units of subassembly XYZ. A cost analyst has prepared the
following estimates on making the subassembly:
Direct materials costs
Direct labor costs
Variable overhead costs
Total variable costs $4 per unit
6 per unit
6 per unit
$16 per unit Additional setup and maintenance costs
Allocated fixed factory overhead
Total fixed costs $30,000
60,000
$90,000 per year Tracy Manufacturing LLC is willing to sell Bell Company the subassembly for $20 per
unit.
Required: Should Bell Company make or buy the subassembly? Support your
answer with analysis.