Answer:
If the company buys the part, it will save $$6,559.6
Explanation:
Giving the following information:
Purchase price= $13.04
The company uses 2,116 units of this part annually.
Production:
Direct Materials per unit $6.34
Direct Labor per unit $7.30
Variable Factory Overhead per unit $2.50
We weren't provided with information regarding the fixed costs. <u>I will assume that non of the fixed overhead costs are avoidable, therefore, they are irrelevant to the decision making process.</u>
Buy:
Total cost= 2,116*13.04= $27,592.64
Production:
Total cost= 2,116*(6.34 + 7.3 + 2.5)= $34,152.24
If the company buys the part, it will save $$6,559.6