Kane company is considering outsourcing a key component. Areliable supploer has quoted a price of 64.50 per unit. Thefollowing costs of component when manufactured in house areexpressed on a per unit basis:

Direct material 23.40

Direct Labor 16.10

Variable Overhead 26.70

Fixed Overhead 6.90

total cost 73.10

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

b.) Should Kane company outsource the component? Yes or noWhy?

c.) What other factors are relevent to this decision? Yes or NoWhy?

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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