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Question - Vaughn Manufacturing currently manufactures a wicket as its main product. The costs per unit are as follows:
Direct materials and direct labor $14
Variable overhead 5
Fixed overhead 8
Total $27
Saran Company has contacted Vaughn with an offer to sell it 4300 of the wickets for $21 each. If Vaughn makes the wickets, variable costs are $19 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Vaughn make or buy the wickets?
Buy; savings = $12900
Make; savings = $8600
Make; savings = $4300
Buy; savings = $4300
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