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Question 5: Kane Company is considering outsourcing a keycomponent. A reliable supplier has quoted a price of $64.50 perunit. The following costs of the component when manufacturedin-house are expressed on a per unit basis (assume Direct Labor isa variable cost):

DirectMaterials $23.40

DirectLabor 16.10

Variable Overhead 26.70

Fixed Overhead $ 6.90

Totalcosts $73.10

a) What assumptions need to be made about the behavior ofoverhead costs for Kane in order to analyze the outsourcingdecision?

SAVING ITEMS RELEVANT
Direct Materials Cost =$
Direct labor Costs =$
Variable overhead costs =$
Fixed overhead costs =$
ADDITIONAL COSTS RELEVANT COSTS
Direct labor Costs =$
Direct materials Costs =$
Fixed Overhead Costs =$
Variable overhead cost =$

b) Should Kane Company outsource the component? ???

c) What other factors are relevant to this decision? ???

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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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