Answer:
$147,000
Explanation:
The computation of the financial advantage (disadvantage) of purchasing the part rather than making it is shown below;
<u>Particulars Make Buy
</u>
Direct material $1,246,000 (70,000 × $17.80)
Direct labour $1,330,000 (70,000 × $17.80)
Variable manufacturing
overhead $70,000 (70,000 × $1)
Fixed manufacturing
overhead $623,000 (70,000 × ($17.10 - $8.20))
Purchase cost $3,395,000 (70,000 × $48.50)
Opportunity cost $273,000
Total cost $3,542,000 $3,395,000
So, the Advantage is
= ($3,542,000 - $3,395,000)
= $147,000
