Make Buy A Company Has Needs 10,000 Units of a Component Used

Essay

Make Buy
A company has needs 10,000 units of a component used in producing one of its products.The latest internal accounting reports show that the per unit manufacturing cost to be $150.00.The manufacturing cost per component broken down into type of costs is as follows:Variable manufacturing costs = $110.00 and fixed manufacturing overhead = $40.The company recently received an offer from another manufacturer to produce the component for $144.00.If they buy the component on the outside 40% of the fixed overhead can be avoided.
Required:
a.If the company decides to have the component made by the outside supplier at $144.00,what is the impact on income?
b.What price would make the company indifferent between making the component internally and having the outside supplier make it?