Question

Bramble Corp., Inc. can produce 100 units of a component part with the following costs: Direct Materials $23000 Direct Labor 3500 Variable Overhead 26000 Fixed Overhead 11000 If Bramble Corp. can purchase the component part externally for $59000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision

Answer 1

$2,500

Step-by-step explanation:

Bramble Corp., Inc

Purchase the component part externally $59,000 - $4,000

=$55,000

Direct Materials $23,000

Direct Labor $3,500

Variable Overhead $26,000

Total $52,500

Hence:

$55,000 -$52,500

=$2,500

Therefore the correct make-or-buy decision will be $2,500