Rex Company uses 1,000 units of components for its manufacturing process. For a volume of 1,000 units, the costs of making one unit of the component are:

Cost of making a component:	£
Direct Ingredients	£14
direct workforce	£20
Variable overheads	£16
Fixed costs	£40

Rex received a quote of £75 per unit for 1,000 units of components from a potential supplier. If Rex purchases 1,000 units of components from the supplier, all costs will be eliminated except for 80 percent of the ongoing fixed overheads.

Given the above scenario, what should Rex do?

Answer rating: 100% (QA)

We must weigh the price of producing the component internally vs buying it from t... View the full answer