PRACTICE $5$

Flextin Company currently produces $1,000$ units of one of its products each month.

The costs of manufacturing $1,000$ units are as follows:

Direct materials $$45,000$

Direct labor $,30,000$

Variable overhead $27,000$

Fixed overiead $63,000$

Total manufacturing product cost $$165,000$

Another company has offered to sell

Flextin $1,000$ units for $$100,000.$ If Flextin can buy the units from the outside supptier,

the idle manufacturing capacity cannot be

used for other purposes, yet none of the fixed costs are avoidable.

Flextin should:

A$.$buy the product because total fixed and variable manufacturing costs are more than $$100,000.$

B$.$ buy the product because the total incremental cost of manufacturing the product is more than $$100,000.$

C$.$ make the product because the cost of direct material plus direct labor is less than $$100,000.$

D$.$make the product because current factory overhead is less than $$100,000.$