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Electric Scooter Co. makes motorized scooters for city commuters. The scooters can be char

Electric Scooter Co. makes motorized scooters for city commuters. The scooters can be char

Electric Scooter Co. makes motorized scooters for city commuters. The scooters can be charged using a regular household plug, and the batteries hold their charge for 24 hours. The manufac- turing plant is currently operating at 70% capacity. The plant manager is considering manu- facturing headlights for the scooters, which are currently being produced by an outside company and purchased by Electric Scooter for $11 each. Electric Scooter has the equipment and the workforce to produce the headlights. The engineers have suggested a variable cost of

$3 in direct labour and $4 in direct materials. The plant overhead rate is 200% of direct labour dollars, and 40% of the overhead is fixed cost.

Required:

Should Electric Scooter make the headlights in-house?

Tripti 05-Dec-2019

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