Fir Company currently manufactures one of the components it uses in its main product. The...
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Fir Company currently manufactures one of the components it uses in its main product. The costs to produce 5,000 of these components last year were as follows: Cost per drive Direct materials $ 12 Direct labor 2 Variable manufacturing overhead 5 Fixed manufacturing overhead 7 Total $ 26 Fir has an opportunity to purchase the 5,000 components from an outside supplier for $29 each. This will allow Fir to rent the space currently used to make the components for $50,000 per year. If all of the variable costs and $3 per unit of the fixed costs are avoidable, would Fir be better off by making the components or buying them and by how much? a. $15,000 better to buy b. $10,000 better to buy c. $30,000 better to buy d. $30,000 better to make
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