Given the following, determine if a buy price of $4.00 per unit for 3,000 units should be accepted. Total variable production costs of making the units equal $11,100, and total production fixed costs are $3,500. Of the fixed costs, $1,500 is avoidable if the units are purchased. Based on price, the company should (make/buy) the units at a net benefit of $_____.

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amcool amcool · Answer 1 · 2022-03-29T13:05:53+02:00

Since the Cost of Buy is lower than the Cost of Make, the company should buy the units at a net benefit of $600.

The decision can be taken by determining the benefit or loss as follows:

1) Calculation of Cost of Make

Cost of Make = Total variable production costs of making the units + Avoidable Fixed Cost of Make = $11,100 + $1,500 = $12,600

2) Calculation of Cost of Buy

Cost of Buy = Buy price per unit * Number of units = $4 * 3,000 = $12,000

3) Since the Cost of Buy is lower than the Cost of Make, it means there is a benefit of $600 calculated as follows:

Benefit from Buy = Cost of Make - Cost of Buy = $12,600 - $12,000 = $600.

Learn more about make or buy decisions at: https://brainly.com/question/13132020.