Beta Inc. can produce a unit of Zed for the following costs: An outside supplier offers to provide Beta with all the Zed units it needs at $58 per unit. If Beta buys from the supplier, it will still incur 40% of its overhead. Beta should:
A) Buy Zed since the relevant cost to make it is $60.
B) Make Zed since the relevant cost to make it is $60.
C) Buy Zed since the relevant cost to make it is $80.
D) Make Zed since the relevant cost to make it is $30.
E) Buy Zed since the relevant cost to make it is $30.

Question

Beta Inc. can produce a unit of Zed for the following costs:  An outside supplier offers to provide Beta with all the Zed units it needs at $58 per unit. If Beta buys from the supplier, it will still incur 40% of its overhead. Beta should:
A) Buy Zed since the relevant cost to make it is $60. 
B) Make Zed since the relevant cost to make it is $60. 
C) Buy Zed since the relevant cost to make it is $80. 
D) Make Zed since the relevant cost to make it is $30. 
E) Buy Zed since the relevant cost to make it is $30.

Quizplus · Accepted Answer

Relevant costs: DM $10 + DL $20 + OH ($50 × 0.6) = $60 to make

Beta Inc Can Produce a Unit of Zed for the Following