A company requires 60,000 units of a certain component. The fixed costs to manufacture this component are US$ 150,000. The variable cost (VC) of manufacturing is US$ 20 each. A supplier offers the same part at US$ 22 ea. Which is better to buy or to manufacture? Explain your answer

A company requires 60,000 units of a certain component. The fixed costs to manufacture this component are US$ 150,000. The variable cost (VC) of manufacturing is US$ 20 each. A supplier offers the same part at US$ 22 ea. Which is better to buy or to manufacture? Explain your answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Course: Costs and Budgeting

A company requires 60,000 units of a certain component. The fixed costs to manufacture this component are US$ 150,000. The variable cost (VC) of manufacturing is US$ 20 each.
A supplier offers the same part at US$ 22 ea.
Which is better to buy or to manufacture? Explain your answer

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