Question
Jemil Manufacturing incurs unit costs of $7.50 ($3.50 variable and $4.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to
Jemil Manufacturing incurs unit costs of $7.50 ($3.50 variable and $4.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the parts for $5 per unit. If it accepts the offer, Jemil will save all variable costs and $1 of fixed costs.
Which of the following is correct?
Accept the offer. It would save the company $5,000 if they were to buy the part
Reject the offer. It would cost the company $5,000 more if they were to buy the part
Accept the offer. It would save the company $25,000 if they were to buy the part
Reject the offer. It would cost the company $25,000 more if they were to buy the part
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