Question: Cannon Co. has been producing a part for a camera they manufacture. The costs for this part are as follows: Fixed costs $392,000 Total variable

Cannon Co. has been producing a part for a camera they manufacture. The costs for this part are as follows:

Fixed costs

$392,000

Total variable costs

$112,000

Units produced

28,000

Cannon has an opportunity to purchase this part rather than manufacture it. To purchase the part will cost $3 a unit. If the part is purchased, fixed costs will be reduced by 20%.

Should Cannon Co. make or buy this part? Show how you arrived at your decision.

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