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Find what is the correct make-or-buy decision

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Reference no: EM132555070

Vaughn, Inc. can produce 100 units of a component part with the following costs:

Direct Materials          $30400

Direct Labour             13600

Variable Overhead      31700

Fixed Overhead         21100

Question 1: If Vaughn, Inc. can purchase the component externally for $88200 and only $7600 of the fixed costs can be avoided, what is the correct "make-or-buy decision"?

Option 1: Make and save $1000.

Option 2: Buy and save $1000.

Option 3: Make and save $4900.

Option 4: Buy and save $12500

Reference no: EM132555070

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