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ABC Company uses a component G28 in its production cycle. The following information is available: 20,000 units $ Number of G28 required Cost to produce
ABC Company uses a component G28 in its production cycle. The following information is available: 20,000 units $ Number of G28 required Cost to produce G28 Direct materials Direct labor Variable overhead Fixed overhead 4.00 16.00 8.00 10.00 If the company buys the part from a supplier instead of making it, the released facility will be idle. The plant manager estimates the following: Avoidable fixed overhead Purchase price of G28 40% 36.00 $ Required: Compute the operating income of the make option. a) b) c) Compute the operation income of the buy option. Should the company make or buy the component G28
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