Question

Robbins Co. has been producing a part for a camera they manufacture. The costs for this part are as follows: a. Picture Robbins has an opportunity to purchase this part rather than manufacture it. b. To purchase the part will cost $3 a unit. If the part is purchased, fixed costs will be reduced by 20%. c. Should Robbins Co. make or buy this part. d. Show how you arrived at your decision.

Answer 1

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

The company should buy the product.

Notes:

1. Variable cost will not be incurred in buy option as variable cost is directly linked to production quantity. In cade of no production, this will be zero.

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

Download xlsx