Answer:
If the company makes the units, it will save $7,000 per period.
Explanation:
Giving the following information:
Make in-house:
Number of units= 16,000
Variable cost per unit= $22
<u>Avoidable fixed cost per unit= $3</u>
Buy:
Number of units= 16,000
Buying price= $27
Rent= $25,000
<u>First, we will determine the total cost of each option:</u>
Make:
Total cost= 16,000*(22 + 3)= $400,000
Buy:
Total cost= 16,000*27 - 25,000= $407,000
If the company makes the units, it will save $7,000 per period.
