helpp 432441

Aug 29, 2021 | Uncategorized

Figure 12 2.

ColorPro uses part 87A in the production of color printers. Unit manufacturing costs of part 87A are:

Direct materials

$8

Direct labor

2

Variable overhead

1

Fixed overhead common costs

4

ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable.

Refer to Figure 12 2. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part?

a. buy the part because it will save $100,000 over making it
b. make the part because it will save $107,000 over buying it
c. buy the part because it will save $107,000 over making it
d. make the part because it will save $10,000 over buying it
e. make the part because it will save $100,000 over buying it

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