Q2 Make or Buy question

J CO must decide whether to make or buy

The cost for 166,000 units are as follows

DM 90,000

DL 20,000

Variable OH 32,000

Fixed OH 24,000

Instead of making the chords at $1 per unit the company has an opportunity to buy them at 0.90 per unit from china.

If company buy chords, all VC and of fixed costs will be eliminated.

a.Prepare an analysis whether make or buy the chords

b.Will your answer be different if the released capacity will generate additional income of $5,000.