Question: Hi Tech Manufacturing Company (HTM) currently makes a component part and requires 30,000 units for the coming year's production. An external supplier has offered to

Hi Tech Manufacturing Company (HTM) currently

Hi Tech Manufacturing Company (HTM) currently makes a component part and requires 30,000 units for the coming year's production. An external supplier has offered to make and deliver the part to HTM at a price of $3 per unit for the coming year. It would cost HTM $3,000 to check all the units from the external supplier for defects. Variable and fixed costs per unit to produce the 30,000 units of the component internally are $2.35 (variable cost per unit) and $1 (fixed cost per unit). If the component was purchased from the external supplier, the only fixed cost that would be reduced is the (fixed) cost of leasing equipment for a year amounting to $6,000. The space vacated by the equipment (which will be sent back to the lessor) can be rented out for a year to earn HTM $4,000. Which of the following statements with regard to the quantitative analysis of HTM's decision on the above component part for the coming year is/are likely to be true? 1. The difference between the relevant cost of making the 30,000 units internally and purchasing them from the external supplier is $9,500 2. The difference between the relevant cost of making the 30,000 units internally and purchasing them from the external supplier is $20,500 3. The difference between the relevant cost of making the 30,000 units internally and purchasing them from the external supplier is $12,500 4. The company should purchase the 30,000 units from the external supplier instead of making it internally O Statement 1 only

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