Answer:
Explanation:
cost of making in-house
Variable cost = 1.95 * 65,000 = 126,750
Related fixed cost = 75,000
Unavoidable fixed cost= 62,000
Total cost of manufacturing = 263,750.
cost of buying
Unit cost = 3.25*65,000 = 211,250
Unavoidable fixed cost = 62,000
Total cost of buying = 273,250 .
Cost of buying is higher than the cost of making
Incremental cost buying = 273,250-263,250 = 9,500
<u>Recommendation</u>
Gilberto should manufacture in - house instead of buying.
