Answer:
The correct decision is to purchase the component as it can save $18,000 of the company by buying.
Explanation:
The cost of making 100 units:
Cost of making = Direct materials + Direct labor + Variable overhead + Fixed overhead
= $129,000 + $34,000 + $48,000 + $30,000
= $241,000
The cost of buying 100 units:
Cost of buying = Purchase price + Unavoidable fixed cost
= $215,000 + $8,000
= $223,000
The correct decision is to purchase the component as it can save $18,000 of the company by buying.
