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Robbins Co. has been producing a part for a camera they manufacture. The costs for this part are as follows:
Fixed cost 392,000
total variable cost 112,000
Units produced 28,000
Robbins 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%.
Question 1: Should Robbins Co. make or buy this part? Show how you arrived at your decision.
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