(Solved):The following standard costs pertain to a component part manufactured by Atoy Co: Direct…

 

Question

The following standard costs pertain to a component part manufactured by Atoy Co:

Direct Materials P2

Direct Labor 5

Factory overhead 20

Factory overhead is applied at P1 per standard machine hour. Fixed capacity cost is 60% of applied factory overhead, and is not affected by any ‘make or buy’ decision. It would cost P25 per unit to buy the part from an outside supplier. In the decision to ‘make or buy’, what is

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