Tex's Manufacturing Company Can Make 100 Units of a Necessary

question 95

Multiple Choice

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 120,000 \\\text { Direct Labor } & 25,000 \\\text { Variable Overhead } & 45,000 \\\text { Fixed Overhead } & 30,000\end{array}$$ If Tex's Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

• A)Buy and save $5,000
• B)Make and save $5,000
• C)Make and save $15,000
• D)Buy and save $15,000

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Definitions:

Knowledge

Information, understanding, or skill that one gets through experience or education; the theoretical or practical understanding of a subject.

Service Work

Work that involves providing a service to businesses or individual clients, customers, or consumers rather than manufacturing goods.

Sweatshops

Work environments that are characterized by poor working conditions, low wages, and long hours, often associated with the exploitation of labor in developing countries.

Exploitation

The act of treating someone unfairly in order to benefit from their work or resources.