Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making an assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part.
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Make
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Buy
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Net Income
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Increase (Decrease)
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Variable manufacturing costs
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$
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Fixed manufacturing costs
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Purchase price
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Total annual cost
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$
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The decision should be to buymake the part.
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