Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 13,000 units of...
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Accounting
Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces
13,000
units of Part B89 annually. The annual costs to produce Part B89 at the level of
13,000
units include:
Direct materials
$3.30
Direct labor
$8.10
Variable manufacturing overhead
$4.10
Fixed manufacturing overhead
$3.50
Total cost
$19.00
All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase 13,000 units of the part from the Nadal Parts Company for $20.40 each, and the facilities currently used to make the part could be rented out to another manufacturer for $23,000 a year, what should Lasso do?
A. Buy the part and save $3.13 per unit.
B. Make the part and save $3.13 per unit.
C. Make the part and save $9.00 per unit.
D. Buy the part and save $9.00 per unit.
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