Question
Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60%
Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orions fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:
Direct materials $12
Direct labour $26
Fixed overhead $10
What decision should Orion take?
Multiple Choice
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Make part, resulting in $40,000 cost advantage.
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Some other answer
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Make part, resulting in $20,000 cost advantage
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Buy part, resulting in $80,000 cost advantage
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Buy part, resulting in $40,000 cost advantage
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