Question
Mighty Safe Fire Alarm is currently buying 60,000 motherboards from MotherBoard, Inc. at a price of $67 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 $67 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, $12 per unit; and variable factory overhead, $17 per unit. Fixed costs for the plant would increase by $89,000. Which option should be selected and why?
a.make, $391,200 increase in profits
b.buy, $89,000 more in profits
c.make, $480,000 increase in profits
d.buy, $391,200 more in profits
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