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Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:   Direct materials                       $12 Direct labour                           $26 Fixed overhead                       $10   What decision should Orion take?   Multiple Choice   Some other answer   Make part, resulting in $20,000 cost advantage   Buy part, resulting in $40,000 cost advantage   Make part, resulting in $40,000 cost advantage.   Buy part, resulting in $80,000 cost advantage

Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:   Direct materials                       $12 Direct labour                           $26 Fixed overhead                       $10   What decision should Orion take?   Multiple Choice   Some other answer   Make part, resulting in $20,000 cost advantage   Buy part, resulting in $40,000 cost advantage   Make part, resulting in $40,000 cost advantage.   Buy part, resulting in $80,000 cost advantage

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
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Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to Orion for $44 each. However, 60% of Orion’s fixed overhead would still continue regardless of the decision made. The costs for Orion to make the part are:

 

Direct materials                       $12

Direct labour                           $26

Fixed overhead                       $10

 

What decision should Orion take?

 

Multiple Choice
  •  
    Some other answer
  •  

    Make part, resulting in $20,000 cost advantage

  •  
    Buy part, resulting in $40,000 cost advantage
  •  
    Make part, resulting in $40,000 cost advantage.
  •  
    Buy part, resulting in $80,000 cost advantage
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