Reference no: EM132967655
Question - Phone Corp. currently makes all of the chargers to be sold with the phones they produce. Charging Corp. has offered to make the chargers to go along with the 5,000 phones that Phone Corp. plans to sell. Charging Corp. will sell the chargers to Phone Corp for $5 each. Additional information regarding Phone Corp.'s current costs to make the chargers is given below:
Per Charger Total (5,000 chargers)
Direct Materials $1.20 $6,000
Direct Labor 1.10 5,500
Variable Overhead 0.50 2,500
Supervisor's Salary 1.30 6,500
Depreciation 1.005,000 $5.10 $25,500
Assuming that the supervisor could be fired if Phone Corp. buys the chargers and that the space where the chargers are made could be used to make a new product with a segment margin of $10,000, should Phone Corp. buy the chargers from Charging Corp. or continue to make their own?
- A. Buy because it will be $9,500 cheaper than making.
- B. Make because it will be $14,500 cheaper than buying.
- C. Buy because it will be $10,500 cheaper than making.
- D. Buy because it will be $5,500 cheaper than making.
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