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Should carlon ltd make or buy the compressors

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Reference no: EM132837014

Carlon Ltd currently manufactures 10,000 compressors per year in one of its production lines. The variable costs per unit are $50 and the total fixed costs of this production line are $250,000 per year.

  • Robson Ltd has contacted Carlon Ltd with an offer to sell to it 10,000 compressors for $48 each.
  • If the compressors are purchased by Carlon Ltd, a cost of $16,000 per year would be incurred for quality control.

Problem 1: Assume the fixed costs are unavoidable. Should Carlon Ltd make or buy the compressors? Why?

Reference no: EM132837014

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