Question
MicroBrush Co. manufactures electric toothbrushes. Each toothbrush requires a small motor, Part M4. MicroBrush is currently manufacturing the motor, but another company, RotorWorld, has offered
MicroBrush Co. manufactures electric toothbrushes. Each toothbrush requires a small motor, Part M4. MicroBrush is currently manufacturing the motor, but another company, RotorWorld, has offered to supply it for $11 per motor. Each motor requires $2.00 of direct materials, $4.00 of direct labor, $3.00 of variable manufacturing overhead, and $1.50 of fixed manufacturing overhead. If MicroBrush accepts RotorWorlds offer, all fixed manufacturing overhead costs will continue. What should MicroBrush do?
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A : Buy Part M4 because it will save $2.00 per unit.
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B : Buy Part M4 because it will save $0.50 per unit.
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C : Make Part M4 because it will save $5.00 per unit.
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D : Make Part M4 because it will save $2.00 per unit.
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