Bannister Co If Bannister Can Buy 1,000 Units from an Outside Supplier

question 114

Multiple Choice

Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows:
$$\begin{array} { | l | r | } \hline \text { Direct material } & \$ 45,000 \\\hline \text { Direct labor } & 30,000 \\\hline \text { Factory overhead ( } 30 \% \text { is variable) } & 98,000 \\\hline\end{array}$$ If Bannister can buy 1,000 units from an outside supplier for $100,000, it should:

• A) Make the product because current factory overhead is less than $100,000.
• B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
• C) Buy the product because the total incremental costs of manufacturing are greater than $100,000.
• D) Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
• E) Make the product because factory overhead is a sunk cost.

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Definitions:

Neurons

Nerve cells that are the basic building blocks of the nervous system, responsible for receiving sensory input, processing information, and transmitting signals.

Increase

An increase refers to a situation where there is a growth or rise in a particular quantity or measure, such as an increase in temperature or population.

Zeitgebers

Environmental cues like light and temperature that regulate the biological clock of organisms, influencing sleep and wakefulness cycles.