Rubium Micro Devices currently manufactures a subassembly for its main product.
ID: 2577599 • Letter: R
Question
Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows:
Direct materials
$52
Direct labor
44
Variable overhead
35
Fixed overhead
38
Total
$169
Crayola Technologies Inc. has contacted Rubium with an offer to sell 8 000 of the subassemblies for $ 144 each. Rubium will eliminate $ 86000 of fixed overhead if it accepts the proposal. Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?
A.Make; savings = $ 286 comma 000
B.Buy; savings =$ 86 comma 000
C.Make; savings =$ 18 comma 000
D.Buy; savings =$ 66 comma 000
Direct materials
$52
Direct labor
44
Variable overhead
35
Fixed overhead
38
Total
$169
Explanation / Answer
Make Buy Per unit Total Per unit Total Direct materials 52 416000 Direct labor 44 352000 Variable overhead 35 280000 Fixed overhead 86000 Purchase cost 144 1152000 Total 1134000 1152000 Make, savings = 1152000-1134000 = $18000 Option C is correct
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