Order Point Ltd Manufactures Componentry Used in the Production of Computers

Multiple Choice

Order Point Ltd manufactures componentry used in the production of computers. The units can be purchased for $50 each from an outside vendor. It costs the manufacturer $60 per unit to produce them, of which 25% is fixed overhead cost. What are the relevant costs for this decision? Based on these costs, which option should the company choose? $\begin{array} { lcc }&\text {Relevant Costs}\\&\underline{\text{(Manufacture and Purchase) }}&\underline{\text {Decision}}\\ \text { i. } & \$ 50 \text { and } \$ 45 & \text { Manufacture } \\ \text { ii. } & \$ 50 \text { and } \$ 45 & \text { Purchase } \\ \text { iii. } & \$ 45 \text { and } \$ 40 & \text { Purchase } \\ \text { iv. } & \$ 45 \text { and } \$ 40 & \text { Manufacture } \end{array}$

A) i
B) ii
C) iii
D) iv