Why should the company make or buy the product

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Reference no: EM133347028

Question: Costs per unit Direct materials 3 Direct labour 2 Variable overhead 5 Depreciation of machines 2 Fixed overhead 4 Total cost per unit 16 The company makes and uses 20,000 units of the product. A supplier has offered to sell the company 20,000 units of the same product for $12 each. If the company does buy the outside product, there is no possibility to resell the machinery as it is a specialty machine that only makes this specific product. The fixed overhead will be reallocated to another product. Should the company make or buy the product? Select one: a. The company should make the product as they would save $2 per unit made. b. The company should make the product as they would save $80,000. c. The company should buy the product and use the machinery for something else. d. The company should buy the product because $12 is less than the $16 it takes to make the product. They would save $40,000.

Reference no: EM133347028

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