Question
Mark incurs a total cost of $20,000 to produce 1,000 bags sets that are sold with its cornhole boards. The bags can be purchased from
Mark incurs a total cost of $20,000 to produce 1,000 bags sets that are sold with its cornhole boards. The bags can be purchased from an outside supplier for $14 per bags set. A related cost study indicates that the total cost of bags sets includes fixed costs equal to 20% of the variable costs involved. Should Mark buy the bags sets if it cannot otherwise use the released capacity?
a) Yes, because Mark could save $2,666.67 by buying the bags
b) Yes, because Mark could save $6,000 by buying the bags
c) No, because Mark would pay $14,000 more by buying the bags
d) Yes, because Mark could save $10,000 by buying the bags
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