Fornelli, Inc If Fornelli, Inc

Multiple Choice

Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$ If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

A) Make and save $500
B) Buy and save $500
C) Make and save $2,500
D) Buy and save $6,500