Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why?

a.make, $244,000 increase in profits
b.buy, $164,090 more in profits
c.buy, $80,000 more in profits
d.make, $164,090 increase in profits
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