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Cirrus Company has calculated that the cost to make a component is made up of materials, $120; variable labour, $60; variable overhead, $30; and fixed overhead, $25. Another company has offered to make the component for $140.
Problem 1: If Cirrus has spare capacity and wants to retain its skilled labour force, what is the benefit of making of buying the components?
Select one:
a. $10 benefit to buy the component
b. $20 benefit to make the component
c. $10 benefit to make the component
d. $40 benefit to buy the component
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