Alex International needs 20,000 units of a certain part to use in its production cycle.If Alex buys the part from Nicole Company instead of making it,Alex could not use the released facilities in another activity;thus,all of the fixed overhead applied will continue regardless of what decision is made.Accounting records provide the following data: Cost to Alex to make the part:
What should Alex's decision be,and what is the total cost savings that would result?
A)Buy,$180,000
B)Buy,$20,000
C)Make,$180,000
D)Make,$20,000

Question

Alex International needs 20,000 units of a certain part to use in its production cycle.If Alex buys the part from Nicole Company instead of making it,Alex could not use the released facilities in another activity;thus,all of the fixed overhead applied will continue regardless of what decision is made.Accounting records provide the following data: Cost to Alex to make the part:
 What should Alex's decision be,and what is the total cost savings that would result?
A)Buy,$180,000 
B)Buy,$20,000 
C)Make,$180,000 
D)Make,$20,000

Quizplus · Accepted Answer

The Answer of Alex International needs 20,000 units of a certain part to use in its production cycle.If Alex buys the part from Nicole Company instead of making it,Alex could not use the released facilities in another activity;thus,all of the fixed overhead applied will continue regardless of what decision is made.Accounting records provide the following data: Cost to Alex to make the part:
 What should Alex's decision be,and what is the total cost savings that would result?
A)Buy,$180,000 
B)Buy,$20,000 
C)Make,$180,000 
D)Make,$20,000

Alex International Needs 20,000 Units of a Certain Part to Use