Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost
Question:
Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows: Direct material $45,000 Direct labor 30,000 Factory overhead (30% is variable) 98,000 If Bannister can buy 1,000 units from a subcontractor for $100,000, it should:
Make the product because current factory overhead is less than $100,000.
Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
Buy the product because the total incremental costs of manufacturing are greater than $100,000.
Make the product because factory overhead is a sunk cost.
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn