Sutton Inc If Sutton Inc

Multiple Choice

Sutton Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 130,000 \\\text { Direct Labor } & 103,000 \\\text { Variable Overhead } & 82,000 \\\text { Fixed Overhead } & 62,000\end{array}$$ If Sutton Inc. can purchase the component part externally for $345000 and only $28000 of the fixed costs can be avoided what is the correct make-or-buy decision?

A) Make and save $99000
B) Buy and save $4000
C) Make and save $2000
D) Buy and save $32000