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A vendor has offered to supply a component for $38 (FOB destination) that has previously been manufactured internally.
Per unit
DM $18
DL 6
Variable overhead 3
Fixed Overhead 4
Total cost $31
Question 1: Suppose fixed costs cannot be avoided if the component is purchased from outside. Should the company make or buy if the vacated facilities are:
a. left idle?
b. Used for other purpose which generates net benefit of Br. 10,000?
c. Rented out for Br. 15,000
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