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What would be the effect of discontinuing production

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Reference no: EM132581167

Question 1: A company produces a single component with variable and fixed production costs of $5 and $3. An external supplier has offered to sell the component to the company for $9 per unit. Assuming the company has no use for its idle capacity, what would be the effect of discontinuing production and sourcing the components from the supplier instead?

Option a) the company will save $1 per unit

Option b) the company will lose $4 per unit

Option c) the company will save $3 per unit

Option d) the company will save $2 per unit

Reference no: EM132581167

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