Caballero manufacturing incurs unit costs of 15 10 variable

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Reference no: EM13395657

Caballero Manufacturing incurs unit costs of $15 ($10 variable and $5 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 20,000 of the assembly part at $13.75 per unit. If the offer is accepted, Caballero will save all variable costs but no fixed costs.

Instructions:

Part A) Prepare an analysis showing the total cost savings, if any, Caballero will realize by buying the part.

Part B) Caballero Company should _________ the part because total annual costs to make are _________ than total costs to buy.

Reference no: EM13395657

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