Question
Mighty Safe Fire Alarm is currently buying 60,000 motherboards from MotherBoard, Inc. at a price of $64 per board. Mighty Safe is considering making its
Mighty Safe Fire Alarm is currently buying 60,000 motherboards from MotherBoard, Inc. at a price of $64 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $30 per unit; direct labor, $11 per unit; and variable factory overhead, $15 per unit. Fixed costs for the plant would increase by $85,000.
Which option should be selected and why?
a.make, $394,800 increase in profits
b.buy, $394,800 more in profits
c.make, $480,000 increase in profits
d.buy, $85,000 more in profits
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started