Grouperman Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$ 10 \
\text { Direct labor } & 10 \
\text { Variable overhead } & 7 \
\text { Fixed overhead } & \underline { 9 } \
\text { Total } & \underline { \underline { \$ 36 } }
\end{array}$$ Fez Company has contacted Grouperman with an offer to sell it 7000 of the subassemblies for $30 each. If Fez makes the subassemblies $4 of the fixed overhead per unit will be allocated to other products.
Instructions
Should Grouperman make or buy the subassemblies? Explain your answer.

Question

Grouperman Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 10 \
\text { Direct labor } & 10 \
\text { Variable overhead } & 7 \
\text { Fixed overhead } & \underline { 9 } \
\text { Total } & \underline { \underline { \$ 36 } }
\end{array}$$ Fez Company has contacted Grouperman with an offer to sell it 7000 of the subassemblies for $30 each. If Fez makes the subassemblies $4 of the fixed overhead per unit will be allocated to other products.
Instructions
Should Grouperman make or buy the subassemblies? Explain your answer.

Quizplus · Accepted Answer

The Answer of Grouperman Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 10 \
\text { Direct labor } & 10 \
\text { Variable overhead } & 7 \
\text { Fixed overhead } & \underline { 9 } \
\text { Total } & \underline { \underline { \$ 36 } }
\end{array}$$ Fez Company has contacted Grouperman with an offer to sell it 7000 of the subassemblies for $30 each. If Fez makes the subassemblies $4 of the fixed overhead per unit will be allocated to other products.
Instructions
Should Grouperman make or buy the subassemblies? Explain your answer.

Grouperman Corporation Currently Manufactures a Subassembly for Its Main Product