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Question - Cannon Co. has been producing a part for a camera they manufacture. The costs for this part are as follows:
Fixed costs $392,000
Total variable costs $112,000
Units produced 28,000
Cannon has an opportunity to purchase this part rather than manufacture it. To purchase the part will cost $3 a unit. If the part is purchased, fixed costs will be reduced by 20%.
Required - Should Cannon Co. make or buy this part? Show how you arrived at your decision.
What do you find out, and what is your initial recommendation? If you don't have enough information, what else would you want to know
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