Elly Industries is a multi-product company that currently manufactures 30,000 units of part MR24 each month for use in production of its products. The facilities now being used to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 35,000 units per month. If Elly were to buy part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40% of their present amount. The variable production costs of Part MR24 are $11 per unit.
-If Elly industries is able to obtain part MR24 from an outside supplier at a purchase price of $10 per unit,the monthly financial advantage (disadvantage)of buying the part rather than making it would be:
A) $30,000
B) $180,000
C) $90,000
D) $120,000

Question

Quizplus · Accepted Answer

11ea7761_160c_c58c_81a5_b14125f49313_TB2580_00 The cost to buy the part would be 30,000 units × $10 per unit = $300,000. The company would save $120,000.

Elly Industries Is a Multi-Product Company That Currently Manufactures 30,000