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Garcia Company produces a part that is used in the manufacture of one of its products. The annual costs associated with the production of 5,000 units of this part are as follows: Direct materials $108,000 Direct labor 156,000 Variable factory overhead 72,000 Fixed factory overhead 168,000 Total costs $504,000 Of the fixed factory overhead costs, $72,000 are avoidable. Another company has offered to sell 5,000 units of the same part to Garcia for $105.60 per unit. The facilities currently used to make the part can be rented out to another manufacturer for $72,000 per year. What should Garcia Company do? A) Make the part to save $48,000. B) Buy the part to save $24,000. C) Make the part to save $96,000. D) Buy the part to save $72,000.
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