Answer:
$8,400
Explanation:
The computation of the annual financial advantage (disadvantage) for the company is shown below:
Particulars Make Buy
Direct material $53,600 (8,000 units × $6.70)
Direct labor $64,800 (8,000 units × $8.10)
Variable manufacturing overhead $8,800 (8,000 units × $1.10)
Supervisor's salary $16,000 (8,000 units × $2)
Fixed manufacturing overhead $2,000
Opportunity cost $16,000
Purchase cost $169,600 (8000 × $21.20)
Total relevant cost $161,200 $169,600
So, Financial (disadvantage) is
= $161,200 - $169,600
= -$8,400
We simply compared the make and buy cost and as we can see that the cost of buying is more than the cost of making so there is a extra cost i.e to be incurred of $8,400 if out side supplier is chosen
