Management Accounting) Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow: Per Unit Direct materials
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Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow:
Per Unit
Direct materials $6.00
Direct labor 4.00
Variable factory overhead 1.00
Fixed supervisor salary 3.00
General fixed factory overhead allocated 5.00
Total costs $21.00
The above per unit costs are based on 8,000 units. An outside supplier will provide 8,000 subassemblies for $19 per unit. The supervisor will be terminated if the subassemblies are not produced in house. The idle factory will be used to manufacture another product with a contribution margin of $60,000. What should Bonneville do?
- A) make the subassemblies and save $20,000
- B) make the subassemblies and save $40,000
- C) buy the subassemblies and save $20,000
- D) buy the subassemblies and save $40,000
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