Problem
Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials $ 45.00
Direct labor 35.00
Variable overhead 33.00
Fixed overhead 20.00
Total $133.00
Crayola Technologies Inc. has contacted Rubium with an offer to sell 5,000 of the subassemblies for $135.00 each. Rubium will eliminate $65,000 of fixed overhead if it accepts the proposal.
Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?