Analysis of correct make-or-buy decision, Managerial Accounting

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Analysis of correct make-or-buy decision

Response to the following problem:

Fornelli, Inc. can produce 100 units of a component part with the following costs:

Direct materials $15000

Direct labor 6500

Variable overhead 16000

Fixed overhead 11000

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?

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Managerial Accounting: Analysis of correct make-or-buy decision

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Managerial Accounting: Analysis of correct make-or-buy decision

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