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Vaughn, Inc. can produce 100 units of a component part with the following costs:
Direct Materials $30400
Direct Labour 13600
Variable Overhead 31700
Fixed Overhead 21100
Question 1: If Vaughn, Inc. can purchase the component externally for $88200 and only $7600 of the fixed costs can be avoided, what is the correct "make-or-buy decision"?
Option 1: Make and save $1000.
Option 2: Buy and save $1000.
Option 3: Make and save $4900.
Option 4: Buy and save $12500
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