supplier has offered to sell Talbot similar wheels for 0 80

supplier has offered to sell Talbot similar wheels for $0 80 per wheel the wheels are purchased trom the outside supplier $20.000 of annual fsed overhead could be avoided and the foclities now If Telbot chooses to buy the wheel trom the outside supplier, then annual net operating Income would

Solution

Analysis :

So answer is c) Increase by $44200

	Make	Buy
Direct material	34000
Direct labour	51000
variable manufacturing overhead	25500
Fixed manufacturing overhead	20000
Opportunity cost	49700
Purchase cost (170000*.80)		136000
Total relevant cost	180200	136000