Question
Make or Buy RKR Consultants produces a monthly report on the semiconductor chip manufactur- ing industry for use by its consultants in serving RKR clients.
Make or Buy RKR Consultants produces a monthly report on the semiconductor chip manufactur- ing industry for use by its consultants in serving RKR clients. The research office now being used to produce the report has fixed monthly overhead costs of $2,000. The research staff have a theoretical capacity to prepare another report on a second industry each month. RKR has learned that a semiconductor industry trade group produces a similar industry report that is available on a subscription basis. If RKR were to subscribe to the report from the industry trade group, the research office would be idle and 90% of the fixed costs would continue to be incurred. There are no alternative uses for the research office. The variable costs associated with preparing the monthly research report are $500 per report. Fixed overhead is allocated based on planned production levels. If RKR Consultants continues to use the monthly research report, it would realize a net benefit by purchasing the report from the semiconductor industry trade group only if the monthly subscription price is less than what amount?
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