Click Submit to complete this assessment Question 6 Fredenck Co is thinking abou

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Click Submit to complete this assessment Question 6 Fredenck Co is thinking about having one of its products manufactured by a subcontractor Currenty,the cost of manufacturing Direct material Direct labor Variable factory overhead 47 38 52,000 actory overhead If Frederick can buy 5,000 units from a subcontractor for $130,000, it should 0 Make the product because current factory overhead is less than $130,000 O Make the product because the cost of direct material plus direct labor of manufacturing is less than $130,000 O Make the product because factory overhead is a sunk cost Buy the product because total fixed and variable manufacturing costs are greater than $130,000 Buy the product because the total incremental costs of manufacturing are greater than $130,000 Click Submit to complete this assessment

Explanation / Answer

Dear Student,

Frederick should buy the product from Sub-contractor because the total fixed and variable manufacturing cost are greater than # 130,000;

Total Manufacturing cost (Variable+Fixed) = $ 1,99,000 and this is greater than the cost at which he can buy from Contractor and thus buying at $ 130,000 is preferred;

Regards,

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