Houston Corporation manufacturers a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit. If Houston Corporation accepts Johnson Company's offer, total fixed costs will be reduced to $60,000. What alternative is more desirable and by what amount is it more desirable?
Alternative Amount
A) Make $ 20,000
B) Make $120,000
C) Buy $ 40,000
D) Buy $100,000

Question

Houston Corporation manufacturers a part for its production cycle. The costs per unit for 5,000 units of this part are as follows:  Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit. If Houston Corporation accepts Johnson Company's offer, total fixed costs will be reduced to $60,000. What alternative is more desirable and by what amount is it more desirable?
Alternative Amount
A) Make $ 20,000 
B) Make $120,000 
C) Buy $ 40,000 
D) Buy $100,000

Quizplus · Accepted Answer

The Answer of Houston Corporation manufacturers a part for its production cycle. The costs per unit for 5,000 units of this part are as follows:  Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit. If Houston Corporation accepts Johnson Company's offer, total fixed costs will be reduced to $60,000. What alternative is more desirable and by what amount is it more desirable?
Alternative Amount
A) Make $ 20,000 
B) Make $120,000 
C) Buy $ 40,000 
D) Buy $100,000

Houston Corporation Manufacturers a Part for Its Production Cycle