Make or Buy

Best Sell Inc, needs chips to make computers. The following is the cost information for each chip if the company is to make chips:

Direct materials $7

Direct labor $7

Variable overhead $3

Allocated fixed factory overhead $5

a) If the company is to buy chips from a third-party supplier, what is the maximum price the company is willing to pay for each chip? (3 pts)

A) $14

B) $17

C) $22

b) If a third-party supplier charges $10 for each chip, list two qualitative factors (other than opportunity cost) the company will need to take into account when deciding whether to make or buy.