Park Industries can produce 100 units of a component part with the following costs: Direct Materials...
Park Industries can produce 100 units of a component part with
the following costs:
| Direct Materials | $12000 |
| Direct Labor | 3500 |
| Variable Overhead | 13000 |
| Fixed Overhead | 11000 |
If Park Industries can purchase the component part externally for
$33000 and only $4000 of the fixed costs can be avoided, what is
the correct make-or-buy decision?
A. Make and save $500
B. Make and save $2,500
C. Buy and save $4,500
D. Buy and save $2,500
Homework Answers
Differential analysis
| Make | Buy | |
| Direct material | 12000 | |
| Direct labor | 3500 | |
| Variable overhead | 13000 | |
| Fixed overhead | 4000 | |
| Purchase cost | 33000 | |
| Total relevant cost | 32500 | 33000 |
So answer is a) Make and save $500
Add Answer to:
Park Industries can produce 100 units of a component part with
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