Prepare an analysis showing the total cost savings

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Reference no: EM13182410

Caballero Manufacturing incurs unit costs of $7.90 ($6.10 variable and $1.80 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 12,500 of the assembly part at $5.75 per unit. If the offer is accepted, Caballero will save all variable costs but no fixed costs.

Instructions: Prepare an analysis showing the total cost savings, if any, Caballero will realize by buying the part.

Caballero Company should _______________ the part because total annual costs to make are less than total costs to buy.

Reference no: EM13182410

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