Back Porch Company Manufactures Lawn Chairs Using an Activity-Based Costing

Multiple Choice

Back Porch Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June: Each lawn chair consists of 8 parts; the total direct materials cost per pillow is $10.00.
If the cost to purchase the same lawn chair from a supplier is $35.00, what should Back Porch do to maximize profits?

A) Purchase the lawn chair from the supplier.
B) Continue to manufacture the lawn chair.
C) Since the cost to manufacture the lawn chair is also $32.20, the company would make the same profit whether it bought the lawn chair or manufactured it.
D) Close down the business.