Fornelli Inc If Fornelli Inc

question 145

Multiple Choice

Fornelli Inc.can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$ If Fornelli Inc.can purchase the component part externally for $44000 and only $4000 of the fixed costs can be avoided what is the correct make-or-buy decision?

• A)Make and save $500
• B)Buy and save $500
• C)Make and save $2500
• D)Buy and save $6500

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