Quick Company Has Been Purchasing a Component, Part Q, for $20

Essay

Quick Company has been purchasing a component, Part Q, for $20 a unit. Quick is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by absorption costing method, is estimated as follows:
$\begin{array}{ll} \$ 12.50 &\text { Direct materials } \\5.00 &\text { Directlabor } \\1.25 &\text { Variable factory overhead } \\\underline{3.15}&\text { Fixed factory overhead } \\\underline{\$21.90}&\text { Total }\end{array}$ Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.