Seran Company has contacted Truckel Inc.with an offer to sell it 5,000 of the wickets for $18.00 each.If Truckel makes the wickets, variable costs are $11 per unit.Fixed costs are $12 per unit however $5 per unit is avoidable.Should Truckel make or buy the wickets?

Question

Quizplus · Accepted Answer

If Truckel makes the wickets, the relevant cost is the variable cost of $11 plus the avoidable fixed cost of $5, totaling $16 per unit. Buying the wickets costs $18 per unit. Therefore, making the wickets saves $2 per unit, resulting in total savings of $10,000 (5,000 units x $2).

Seran Company Has Contacted Truckel Inc