Answer:
Increase in costs by buying= $11,300
Explanation:
Giving the following information:
Ortega Industries manufactures 20,950 components per year.
Direct materials $ 184,000
Direct labor 410,000
Variable manufacturing overhead 107,000
Fixed manufacturing overhead 290,000
Total of $ 991,000
This facility cannot be used for any other purpose.
An outside supplier has offered to sell the component to Ortega for $34.
We will not have into account the fixed MOH cost, because it exists in both options.
Make in house total cost= 701,000
Buy= 34* 20950= 712,300
Increase in costs by buying= 712,300 - 701,000= $11,300
