Bonneville Company Is Producing a Subassembly Used in the Production

Multiple Choice

Bonneville Company is producing a subassembly used in the production of a product.The costs incurred for the subassembly follow:
$\begin{array}{ll}&\text { Per Unit }\\\text { Direct materials } & \$ 6.00 \\\text { Direct labor } & 4.00 \\\text { Variable factory overhead } & 1.00 \\\text { Fixed supervisor salary } & 3.00 \\\text { Depreciation expense on factory equipment } & 2.00 \\\text { General fixed factory overhead allocated } & \underline{5.00} \\\text { Total costs } & \$ 21.00\end{array}$
The above per unit costs are based on 8,000 units.An outside supplier will provide 8,000 subassemblies for $19 per unit.The supervisor will be terminated if the subassemblies are not produced in house.The idle factory will be used to manufacture another product with a contribution margin of $60,000.What should Bonneville do?

A) make the subassemblies and save $20,000
B) make the subassemblies and save $40,000
C) buy the subassemblies and save $20,000
D) buy the subassemblies and save $40,000