Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units is: Direct material Direct labor Factory overhead (30% is variable) $ 45,000 30,000 98,000 If Bannister can buy 1,000 units from an outside supplier for $100,000, it should: O Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000. O Make the product because factory overhead is a sunk cost. O Buy the product because the total incremental costs of manufacturing are greater than $100,000. O Make the product because current factory overhead is less than $100,000. Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units is: Direct material Direct labor Factory overhead (30% is variable) $ 45,000 30,000 98,000 If Bannister can buy 1,000 units from an outside supplier for $100,000, it should: O Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000. O Make the product because factory overhead is a sunk cost. O Buy the product because the total incremental costs of manufacturing are greater than $100,000. O Make the product because current factory overhead is less than $100,000. Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Se121.
Transcribed Image Text:Bannister Co. is thinking about having one of its products manufactured by a subcontractor.
Currently, the cost of manufacturing 1,000 units is:
Direct material
Direct labor
Factory overhead (30% is variable)
$ 45,000
30,000
98,000
If Bannister can buy 1,000 units from an outside supplier for $100,000, it should:
O Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
O Make the product because factory overhead is a sunk cost.
O Buy the product because the total incremental costs of manufacturing are greater than $100,000.
O Make the product because current factory overhead is less than $100,000.
O Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
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