Answer:
It the company buys the units, the effect on income will be an $8,000 decrease.
Explanation:
Giving the following information:
Production costs:
Direct materials= $13.2
Direct labor= 20.8
Variable manufacturing overhead= 3.00
Avoidable fixed manufacturing overhead= 4.5
Unitary cost= $41.5
Outside supplier offer= 10,000 units for $42,3 each
We need to calculate the relevant total cost of each option.
Make in-house:
Total relevant cost= 10,000*41.5= $415,000
Buy:
Total relevant cost= 10,000*42.3= $423,000
It the company buys the units, the effect on income will be an $8,000 decrease.
