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Fir Company currently manufactures one of the components it uses in its main product. The costs to produce 5,000 of these components last year were
Fir Company currently manufactures one of the components it uses in its main product. The costs to produce 5,000 of these components last year were as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total Cost per drive $ 12 2 5 7 $ 26 Fir has an opportunity to purchase the 5,000 components from an outside supplier for $29 each. This will allow Fir to rent the space currently used to make the components for $50,000 per year. If all of the variable costs and $3 per unit of the fixed costs are avoidable, would Fir be better off by making the components or buying them and by how much? a. $10,000 better to buy b. $30,000 better to make C. $30,000 better to buy d. $15,000 better to buy
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