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Problem:
DeMarcus Industries manufactures a widget used in several models of its automatic dishwashers. Monthly production costs for 5,000 units are:
Direct materials $40,000
Direct labor 10,000
Variable support costs 25,000
Fixed support costs 20,000
Total costs $95,000
It is estimated that 20% of the fixed support costs assigned to the widgets will no longer be incurred if the company purchases the part from the outside supplier for $15.50 per unit. Considering all relevant information, what should DeMarcus do?
Additional Information:
This question is basically belongs to the Finance as well as it explains about the decision that the firm should take about purchasing the product.
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