Question 15

Rods Manufacturing Company can make 100 units of a necessary component part with the following costs

Direct Materials $60,000

Direct Labor 10,000

Variable Overhead 30,000

Fixed Overhead 20,000

If Rods Manufacturing Company can purchase the component externally for $95,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

	a.	Make and save $5,000
	b.	Buy and save $5,000
	c.	Make and save $15,000
	d.	Buy and save $15,000