Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r }
\text { Direct Materials } & \$ 15,000 \
\text { Direct Labor } & 6,500 \
\text { Variable Overhead } & 16,000 \
\text { Fixed Overhead } & 11,000
\end{array}$$ If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
A) Make and save $500
B) Buy and save $500
C) Make and save $2,500
D) Buy and save $6,500

Question

Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 15,000 \
\text { Direct Labor } & 6,500 \
\text { Variable Overhead } & 16,000 \
\text { Fixed Overhead } & 11,000
\end{array}$$ If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
A) Make and save $500
B) Buy and save $500
C) Make and save $2,500
D) Buy and save $6,500

Quizplus · Accepted Answer

The Answer of Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 15,000 \
\text { Direct Labor } & 6,500 \
\text { Variable Overhead } & 16,000 \
\text { Fixed Overhead } & 11,000
\end{array}$$ If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
A) Make and save $500
B) Buy and save $500
C) Make and save $2,500
D) Buy and save $6,500

Fornelli, Inc If Fornelli, Inc