A Firm Currently Makes a Component,and Requires 30 000 for the Coming

A firm currently makes a component,and requires 30 000 for the coming year's production.Another supplier has offered the part at a delivered price of $3 per unit.It would cost $3000 to check purchased units for quality.Product costs per unit for the past year were $2.35 variable,and $1 fixed based on 30 000 units.If the component was bought,fixed overhead would be reduced by $6000,the cost of leasing specialised equipment.The space vacated by the equipment can be rented for $4000 for the year.Which of the following statements is the correct quantitative analysis of the make or buy decision?

A) The buy option costs $12 500 more than the make option.
B) The buy option costs $12 500 less than the make option.
C) The buy option costs $10 500 more than the make option.
D) The firm is indifferent between the two options.

Correct Answer:

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