Nelson Manufacturing Company can make 100 units of a necessary component part with the following costs: $$\begin{array} { l r }
\text { Direct Materials } & \$ 120,000 \
\text { Direct Labor } & 25,000 \
\text { Variable Overhead } & 45,000 \
\text { Fixed Overhead } & 20,000
\end{array}$$ If Nelson Manufacturing Company can purchase the component externally for $190000 and only $5000 of the fixed costs can be avoided what is the correct make-or-buy decision?
A) Make and save $5000
B) Buy and save $5000
C) Make and save $15000
D) Buy and save $15000

Question

Nelson Manufacturing Company can make 100 units of a necessary component part with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 120,000 \
\text { Direct Labor } & 25,000 \
\text { Variable Overhead } & 45,000 \
\text { Fixed Overhead } & 20,000
\end{array}$$ If Nelson Manufacturing Company can purchase the component externally for $190000 and only $5000 of the fixed costs can be avoided what is the correct make-or-buy decision?
A) Make and save $5000
B) Buy and save $5000
C) Make and save $15000
D) Buy and save $15000

Quizplus · Accepted Answer

The Answer of Nelson Manufacturing Company can make 100 units of a necessary component part with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 120,000 \
\text { Direct Labor } & 25,000 \
\text { Variable Overhead } & 45,000 \
\text { Fixed Overhead } & 20,000
\end{array}$$ If Nelson Manufacturing Company can purchase the component externally for $190000 and only $5000 of the fixed costs can be avoided what is the correct make-or-buy decision?
A) Make and save $5000
B) Buy and save $5000
C) Make and save $15000
D) Buy and save $15000

Nelson Manufacturing Company Can Make 100 Units of a Necessary