Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units is:
If Bannister can buy 1,000 units from an outside supplier for $100,000, it should:
A) Make the product because current factory overhead is less than $100,000.
B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
C) Buy the product because the total incremental costs of manufacturing are greater than $100,000.
D) Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
E) Make the product because factory overhead is a sunk cost.

Question

Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units is:
 If Bannister can buy 1,000 units from an outside supplier for $100,000, it should:
A) Make the product because current factory overhead is less than $100,000. 
B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000. 
C) Buy the product because the total incremental costs of manufacturing are greater than $100,000. 
D) Buy the product because total fixed and variable manufacturing costs are greater than $100,000. 
E) Make the product because factory overhead is a sunk cost.

Quizplus · Accepted Answer

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