Question

If Tex's Manufacturing Company purchases the component externally, $20,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying

Answer 1

$210,000

Step-by-step explanation:

The computation of the external price is shown below

Making cost = buying cost

$120,000 + $25,000 + $45,000 + $30,000) = external price + Unavoidable fixed cost (30,000-20,000)

$220,000 = External price + $10,000

So,

External price = 210,000

Hence, the same is to be considered

Therefore the external price is $210,000