When you completed your audit of the Surtel Company

When you completed your audit of the Surtel Company, management asked for your assistance in deciding whether to continue manufacturing a part or to buy it from an outside supplier. The part, which is named Faktron, is a component used in some of the finished products of the company. From your audit working papers and from further investigation, you develop the following data as being typical of the company’s operations:

• The annual requirement for Faktrons is 5,000 units. The lowest quotation from a supplier was $8 per unit.

• Faktrons have been manufactured in the precision machinery department. If Faktrons are purchased from an outside supplier, certain machinery will be sold and would realize its net book value.

• Following are the total costs of the precision machinery department during the year under audit when 5,000 Faktrons were made:

Direct materials


Direct labour


Indirect labour


Light and heat






Property taxes and insurance


Payroll taxes and other benefits




• The following precision machinery department costs apply to the manufacture of Faktrons: direct materials, $17,500; direct labour, $28,000; indirect labour, $6,000; power, $300; other $500. The sale of the equipment used for Faktrons would reduce the following costs by the amounts indicated: depreciation, $2,000; property taxes and insurance, $1,000.

• The following additional precision machinery department costs would be incurred if Faktrons were purchased from an outside supplier: freight $.50 per unit; and, indirect labour for receiving, materials handling, and inspection $5,000. The cost of the purchased Faktrons would be considered a precision machinery department cost.


a. Prepare a schedule comparing the total costs of the precision machinery department (1) when Faktrons are made, and (2) when Faktrons are bought from an outsider supplier.

b. Discuss the considerations, in addition to the cost factors, you would bring to the attention of managers in assisting them in deciding whether to make or buy Faktrons. Include in your discussion considerations that might be applied to the evaluation of the outside supplier.

Our Essay Format
  • Times New Roman, 12 pt
  • 1 Inch Margins
  • Double/ Single Spacing
  • 275/ 550 Words Per Page
  • MLA/ APA/ Turabian/ Chicago style, etc

A standard double-spaced page contains 275 words

Free Features
  • Hiring a preferred expert
  • Bibliography & cover page
  • Revisions within 14-30 days
  • 24/7 customer support

Team of Professional Essay Writers

With our essay service, you'll find an essay writer for any task. Their rating is based on previous customer reviews and successful orders. Before you hire a writer, you can familiarize yourself with their track record in detail.