Reference no: EM132721743
Question - Total Refrigeration Limited manufactures 10,000 units of Part RS4 for use in its annual production of refrigerators. The following costs are reported:
Direct materials $20,000
Direct labour $55,000
Variable overhead $45,000
Fixed overhead applied $70,000
Cool Components Limited has offered to sell Total Refrigeration 10,000 units of Part RS4 for $18 per unit. If Total Refrigeration accepts the offer, some of the facilities being used could be rented to a third party for $15,000 per year. It is expected that $40,000 of the fixed overhead applied to production of Part RS4 would be totally eliminated. Total Refrigeration should
Required -
a. Make Part RS4 because it would be $5,000 per year cheaper.
b. Buy Part RS4 because it would be $25,000 per year cheaper.
c. Buy Part RS4 because it would be $10,000 per year cheaper.
d. Make Part RS4 because it would be $15,000 per year cheaper.
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