Answer:
Manson Industries
The total cost savings that Manson will realize by buying the assembly part instead of making it is:
($14,700), showing that more costs will be incurred.
Explanation:
a) Data and Calculations:
Make Buy
Variable cost per unit $5 $6
Fixed cost per unit 2 2
Total cost per unit $7 $8
Total units required 14,700 14,700
Total costs $102,900 $117,600
Cost saving = ($14,700)
b) Based on the above calculations, it benefits Manson more to produce the part internally than to buy from an outside supplier. There is a cost difference of $1 because the fixed costs will still be incurred whatever decision is taken.
