Gecko Company Is Evaluating the Use of a Supplier Versus

Multiple Choice

Gecko Company is evaluating the use of a supplier versus making the wheels for its skateboards internally.The currently manufactured wheels have a variable unit cost of $2.Fixed costs are $16,000 per month, however, 25% can be eliminated if wheels are no longer produced.A supplier has offered to produce this part for $3 per wheel and can produce the 3,200 wheels for the 800 skateboards needed monthly.Should Gecko outsource wheels or make them internally?

A) Outsource because the incremental cost savings is $12,800.
B) Make the product because the incremental cost savings is $3,200.
C) Outsource because the incremental cost savings is $800.
D) Outsource because the incremental cost savings is $8,800.