ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part?   Make the part because it will save $100,000 over buying it. Make the part because it will save $107,000 over buying it. Buy the part because it will save $107,000 over making it. Buy the part because it will save $100,000 over making it. e. Make the part because it will save $10,000 over buying it.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
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ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part?
 
Make the part because it will save $100,000 over buying it.
Make the part because it will save $107,000 over buying it.
Buy the part because it will save $107,000 over making it.
Buy the part because it will save $100,000 over making it.
e. Make the part because it will save $10,000 over buying it.
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