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ABC inc, is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 15,000 of the
ABC inc, is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 15,000 of the components each year. The unit product cost of the component according to the company's absorption cost accounting system is given as follows: Assume that direct labor is variable cost. Of the fixed manufacturing overhead, 25% is avoidable if the component were bought from the outside supplier; the remainder is not avcidable. In addition, making the component uses 6 minutes on the machine that is the company's current constraint. If the component were bought, time would be treed up for use on another product that requires 12 minutes on this machine and that has a contribution margin of $8.10 per unit. When deciding whether to make or bur the component, what cost of making the component should be compared to the price of buying the component? $17.10 per unit $15.10 per unit $15.55 per unit $16.15 per unit
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