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Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:   Direct materials                       $12 Direct labour                           $26 Fixed overhead                       $10   What decision should Orion take?     a)Make part, resulting in $20,000 cost advantage   b)Make part, resulting in $40,000 cost advantage.   c)Buy part, resulting in $80,000 cost advantage   d)Some other answer

Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:   Direct materials                       $12 Direct labour                           $26 Fixed overhead                       $10   What decision should Orion take?     a)Make part, resulting in $20,000 cost advantage   b)Make part, resulting in $40,000 cost advantage.   c)Buy part, resulting in $80,000 cost advantage   d)Some other answer

FINANCIAL ACCOUNTING
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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4. 

 

Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:

 

Direct materials                       $12

Direct labour                           $26

Fixed overhead                       $10

 

What decision should Orion take?

 


 

a)Make part, resulting in $20,000 cost advantage

 
b)Make part, resulting in $40,000 cost advantage.
 
c)Buy part, resulting in $80,000 cost advantage
 
d)Some other answer
 
e)Buy part, resulting in $40,000 cost advantage
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