Exhibit 22-4 Lauria Electronics has excess capacity that could be used to make 2,000 antennas for the cell phones that the company produces. The following cost figures are available:
Lauria can buy the antennas from an outside supplier for $10.50.
Refer to Exhibit 22-4. Given the data above, Lauria would:

Question

Exhibit 22-4 Lauria Electronics has excess capacity that could be used to make 2,000 antennas for the cell phones that the company produces. The following cost figures are available:
 Lauria can buy the antennas from an outside supplier for $10.50.
Refer to Exhibit 22-4. Given the data above, Lauria would:

Quizplus · Accepted Answer

Based on the given cost figures, the cost of making 2,000 antennas in-house would be:

Direct materials: $2,000 (2,000 antennas x $1 each)
Direct labor: $4,000 (2,000 antennas x $2 each)
Variable overhead: $800 (2,000 antennas x $0.40 each)
Fixed overhead: $4,000 (given)
Total cost: $10,800

On the other hand, if Lauria buys the antennas from an outside supplier for $10.50 each, the total cost would be $21,000.

Therefore, Lauria would save $10,200 ($21,000 - $10,800) by buying the antennas from an outside supplier, which is choice B.

Exhibit 22-4 Lauria Electronics Has Excess Capacity That Could Be