Begonia uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $10 Direct labor 3 Variable overhead 2 Fixed overhead 4 Begonia uses 130,000 units of 87A per year. Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18. Fixed overhead is unavoidable. Should Begonia make or buy the part? Group of answer choices It should make the part because it will save $390,000 over buying it. It should buy the part because it will save $390,000 over making it. It should make the part because it will save $1,250,000 over buying it. It should buy the part because it will save 1,250,000 over making it. It should buy the part because it will save $340,000 over making it.
Begonia uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $10 Direct labor 3 Variable overhead 2 Fixed overhead 4 Begonia uses 130,000 units of 87A per year. Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18. Fixed overhead is unavoidable. Should Begonia make or buy the part? Group of answer choices It should make the part because it will save $390,000 over buying it. It should buy the part because it will save $390,000 over making it. It should make the part because it will save $1,250,000 over buying it. It should buy the part because it will save 1,250,000 over making it. It should buy the part because it will save $340,000 over making it.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Begonia uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are:
|
Direct materials |
$10 |
|
Direct labor |
3 |
|
Variable |
2 |
|
Fixed overhead |
4 |
Begonia uses 130,000 units of 87A per year. Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18. Fixed overhead is unavoidable.
Should Begonia make or buy the part?
Group of answer choices
It should make the part because it will save $390,000 over buying it.
It should buy the part because it will save $390,000 over making it.
It should make the part because it will save $1,250,000 over buying it.
It should buy the part because it will save 1,250,000 over making it.
It should buy the part because it will save $340,000 over making it.
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