Super Security Company manufacturers home alarms. Currently it is manufacturing one of its components at a variable cost of $45 and fixed costs of $15 per unit. An outside provider of this component has offered to sell Safe Security the component for $50. Determine the best plan and calculate the savings.

Question

Quizplus · Accepted Answer

The total cost to manufacture the component is $45 (variable) + $15 (fixed) = $60 per unit. Purchasing the component costs $50 per unit. Therefore, manufacturing saves $10 per unit compared to purchasing.

Super Security Company Manufacturers Home Alarms