Case 1: A supplier offered to sell the company this component at $4 per unit. If the company purchases the component, 30% of the fixed costs can be eliminated.

What is the total cost to make the components? *

$25,000

$36,000

$45,000

None of the above

What is the amount of avoidable fixed costs? *

$2,700

$6,300

$9,000

None of the above

What is the total cost to buy the components? *

$60,000

$66,300

$62,700

None of the above

What is the correct make-or-buy decision? *

Buy and save $20,400

Make and save $15,000

Make and save $21,300

None of the above

Case 2: Refer to case 1 and assume that through buying the components, Mira Company can use the released productive capacity to generate additional income of $22,000 from producing another product.

What is the total cost to make the components? *

$45,000

$67,000

$23,000

None of the above

The net increase (decrease) in the net income of accepting the suppliers offer is: *

$700

$(700)

$7,000

None of the above

Mira Company incurs the following annual costs in producing 15,000 components. Direct Materials $16,000 Direct Labor 9,000 11,000 Variable Manufacturing Overhead Fixed Manufacturing Overhead 9,000