The estimated costs of producing 6,000 units of a component are:

	Per Unit	Total
Direct Material	$10	$60,000
Direct Labor	8	48,000
Applied Variable Factory Overhead	9	54,000
Applied Fixed Factory Overhead	12	72,000
$1.5 per direct labor dollar
	$39	$234,000

The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved.

Should the component be purchased from the market?

Answer rating: 100% (QA)

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