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Mathematics, 07.12.2020 07:20 yoongnzl
Renad Company must decide whether to make or buy some of its components in a product it produces. The costs of making 160,000 units of this component are as follows.
Direct materials $90,000 Variable overhead $32,000
Direct labor 14,600 Fixed overhead 24,000
Instead of making the components, the company has an opportunity to buy them at $0.90 per unit. If the company purchases the component, all variable costs and one-fourth of the fixed costs will be eliminated.
So, should Renad Company make or buy this components?
Select one:
a. Buy the component because it will increase (save) the net income by $7,600
b. Make the component because it will increase (save) the net income by $1,400
c. Buy the component because it will increase (save) the net income by $1,400
d. The correct answer is not available
e. Make the component because it will increase (save) the net income by $7,600
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Answers: 2
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Renad Company must decide whether to make or buy some of its components in a product it produces. Th...
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