ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part? Make the part because it will save $100,000 over buying it. Make the part because it will save $107,000 over buying it. Buy the part because it will save $107,000 over making it. Buy the part because it will save $100,000 over making it. e. Make the part because it will save $10,000 over buying it.
ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part? Make the part because it will save $100,000 over buying it. Make the part because it will save $107,000 over buying it. Buy the part because it will save $107,000 over making it. Buy the part because it will save $100,000 over making it. e. Make the part because it will save $10,000 over buying it.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part?
Make the part because it will save $100,000 over buying it.
Make the part because it will save $107,000 over buying it.
Buy the part because it will save $107,000 over making it.
Buy the part because it will save $100,000 over making it.
e. Make the part because it will save $10,000 over buying it.
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