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Should jansung company make or buy the phones

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Jansung Company manufactures 5,000 telephones per year. The full manufacturing costs per telephone are as follows:

Direct materials                                         $ 2

Direct labor                                               8

Variable manufacturing overhead                    5

Average fixed manufacturing overhead             5

Total                                                        $20

Telecom America has offered to sell Jansung Company 5,000 telephones for $20 per unit. If Jansung Company accepts the offer, $12,500 of fixed overhead will be eliminated.

Question 1: Applying differential analysis to the situation, should Jansung Company make or buy the phones?

Reference no: EM132528642

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