Jain Simmons Company needs 10,000 units of a certain part to be used in production. If Jain Simmons buys the part from Sullivan Company
instead of making the part itself, Jain Simmons could not use its present facilities for another manufacturing activity. Sixty percent of the fixed overhead
applied will continue regardless of what decision is made. The following quantitative information is by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″>available regarding the situation presented:

by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″>

Cost to make the part:

Direct material $6

Direct labor 24

Variable overhead 12

Fixed overhead applied 15

$57

Cost to buy the part $53

by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″>
A. In deciding whether to make or buy the part, what is Jain Simmons total relevant cost to make the part?

B. Which alternative (make or buy) is more desirable for Jain Simmons and by what amount?

C. Suppose that Jain Simmons Company is in the area of the country with high unemployment and that it is unlikely that displaced employees
will find other by Savings Explorer” href=”http://onlinesolutionproviders.blogspot.com/2012/02/jain-simmons-company-needs-10000-units.html#” class=”c6″>employment. How might that
impact your decision?