Marigold Corp. can produce 100 units of a component part with the following costs: Direct Materials...
Marigold Corp. can produce 100 units of a component part with
the following costs:
| Direct Materials | $20000 |
| Direct Labor | 4500 |
| Variable Overhead | 18000 |
| Fixed Overhead | 11000 |
If Marigold Corp. can purchase the component part externally for
$47000 and only $4000 of the fixed costs can be avoided, what is
the correct make-or-buy decision?
a. Buy and save $2500
b. Make and save $500
c. Make and save $2500
d. Buy and save $4500
Homework Answers
Cost of making = 20000+4500+18000 = 42500
Cost of buying = 47000-4000 = 43000
So, make and save 500 (42500-43000)
Option B is the answer
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