Answer:
It is cheaper to make the component in house. It will save $5 per component.
Explanation:
Giving the following information:
Currently, it is manufacturing one of its components at a variable cost of $40 and fixed costs of $15 per unit. An outside provider of this component has offered to sell Rowan Quinn the component for $45.
First, we need to calculate the total unitary cost:
In house:
Total unitary cost= unitary fixed cost + unitary variable cost
Total unitary cost= 15 + 40= $55
Buy:
Total unitary cost= 15 + 45= $60
It is cheaper to make the component in house. It will save $5 per component.
