Answer:
(A)
The total relevant cost would be: 495,000
Buy 15,000 x 35 = 525,000
It would be better to keep producing.
(B) relevant cost 495,000
Buy 525,000 - 150,000 = 375,000
In this scenario is better to buy the procuct, as this alternative will come with the 525,000 cost but 150,000 contribution margin in the new product
Explanation:
The relevant cost would be:
Direct Materials 14
Direct labor 10
Variable Overhead 3
traceable fixed overhead 6
Total 33
15,000 x 33 = 495,000
<u>The depreciation is a sunk cost,</u> already incurred when the machine was purchased. Is not relevant to decide wether to produce or buy
The potencial new product would be opportunity cost:
It should be considered as a decrease in the cost of buy the product
