Mighty Safe Fire Alarm is currently buying 62,000 motherboards from Mother Board, Inc. at a price of
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Question:
Mighty Safe Fire Alarm is currently buying 62,000 motherboards from Mother Board, Inc. at a price of $65 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $29 per unit; direct labor, $12 per unit; and variable factory overhead, $17 per unit. Fixed costs for the plant would increase by $78,000. Which option should be selected and why?
a. Make, $355,880 increase in profits
b. Make, $434,000 increase in profits
c. Buy, $355,880 more in profits
d. Buy, $78,000 more in profits
e. Buy $356,000 increase in profits
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Authors: Melissa Barker, Donald I. Barker, Nicholas F. Bormann, Krista E. Neher
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