Alex International needs 20,000 units of a certain part to use in its production cycle. If Alex buys the part from Nicole Company instead of making it, Alex could not use the released facilities in another activity; thus, all of the fixed overhead applied will continue regardless of what decision is made. Accounting records provide the following data: Cost to Alex to make the part: Direct
materials $ 4.00 Direct labor 9.00 Variable overhead 12.00 Fixed overhead applied 9.00 Cost to buy the part from the Nicole Company 26.00 What should Alex's decision be, and what is the total cost savings that would result?
A) Buy, $180,000
B) Buy, $20,000
C) Make, $180,000
D) Make, $20,000
D
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