Day star collected the following information:

Day Star can sell 25,000 units per year, at $130 each. The company also has an offer from a subsidiary to rent its plant facilities for $2,000,000. The fixed overhead will be incurred in each alternative, but there will be a savings of

$150,000 in the fixed costs under the renting alternative.

What production level is required for Day Star lobe indifferent between making or buying the part if $260,000 of

Fixed costs can be eliminated by buying?

A) 32,500 units

13) 26,500 units

C) 12,500 units

D) 1,000 units

E) 0 units

Transcribed Image Text:

Cost to buy one unit Production costs per unit: Direct materials Direct labour Variable overhead Total fixed overhead $48 $22 $16 $2 $360,000 Cost to buy one unit Production costs per unit: Direct materials Direct labour Variable overhead Total fixed overhead $48 $22 $16 $2 $360,000

Answer rating: 100% (QA)

calculation of out flow for make or buydecision 1 particular unit rate amount if ... View the full answer