Rowan Quinn Company manufactures kitchen appliances.Currently, it is manufacturing one of its components at a variable cost of $40 and fixed costs of $15 per unit.An outside provider of this component has offered to sell Rowan Quinn the component for $45.Determine the best plan and calculate the savings.
A)$5 savings per unit if manufactured
B)$5 savings per unit if purchased
C)$10 savings per unit if manufactured
D)$15 savings per unit if purchased

Question

Quizplus · Accepted Answer

The total cost of manufacturing the component is $40 (variable) + $15 (fixed) = $55. Purchasing the component costs $45. Therefore, manufacturing saves $10 per unit compared to purchasing.

Rowan Quinn Company Manufactures Kitchen Appliances