Use the following scenario to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 / unit,but must spend $15,000 per year in tooling to do so.An outside firm has quoted a total price of $12 / unit to supply the quantity required.
-Refer to the instruction above.What does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)?

Question

Quizplus · Accepted Answer

If the company makes the item, the cost would be:
$10 per unit x 5,000 units = $50,000 for the units
$15,000 for tooling
Total cost = $65,000
If the company buys the item, the total cost would be:
$12 per unit x 5,000 units = $60,000
The company saves: 
$65,000 - $60,000 = $5,000 by selecting the low-cost option.

Use the Following Scenario to Answer the Questions Below