Answer:
Production total cost= $104,400
It is more profitable to buy the product.
Explanation:
Giving the following information:
Production costs (1,000 units):
Direct material $ 45,000
Direct labor $30,000
Factory overhead (30% is variable) 98,000
Buy:
1,000 units from an outside supplier for $100,000.
<u>I will assume that the fixed overhead is not avoidable, therefore it should not be taken into account for the decision making.</u>
Production total cost= 45,000 + 30,000 + (98,000*0.3)
Production total cost= $104,400
It is more profitable to buy the product.
