Question: Each year Wright's Widgets buys 10,000 subcomponents that it needs in the production of its widgets from an outside supplier for $15 each. If Wright
Each year Wright's Widgets buys 10,000 subcomponents that it needs in the production of its widgets from an outside supplier for $15 each. If Wright instead used its existing idle capacity to produce it in-house, the variable production costs would be $8 per unit and $3 of fixed production overhead would be allocated to each unit. Additionally, Wright would need to hire one quality control technician for $28,000 per year. The excess capacity that would be required is currently leased to another company for $25,000 per year. What is the advantage or disadvantage if Wright continues to buy the subcomponent from the outside supplier? 7
A. $37,000 advantage
B. $13,000 advantage
C. $3,000 disadvantage
D. $17,000 disadvantage
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