Question: PLEASE ANSWER ABC Company uses a component G28 in its production cycle. The following information is available: Number of G28 required 20,000 units Cost to

PLEASE ANSWER

ABC Company uses a component G28 in its production cycle. The following information is available: Number of G28 required 20,000 units Cost to produce G28 Direct materials $ 4.00 Direct labor 16.00 Variable overhead 8.00 Fixed overhead 10.00 If the company buys the part from a supplier instead of making it, the released facility will be idle. The plant manager estimates the following: Avoidable fixed overhead 40% Purchase price of G28 $ 36.00 Required: a) Compute the operating income of the make option. (4 Marks) b) Compute the operation income of the buy option. (2 Marks) c) Should the company make or buy the component G28. (1 Mark)

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