# Factor Co. can produce a unit of product for the following costs: Direct material $8 Direct labor 24 Overhead 40 Total costs per unit$72 An outside supplier offers to provide Factor with all the units it needs at $46 per unit. If Factor buys from the supplier, the company will still incur 60% of its overhead. Factor should choose to: A. Buy since the relevant cost to make it is$56. B. Make since the relevant cost to make it is $48. C. Buy since the relevant cost to make it is$48. D. Make since the relevant cost to make it is $32. E. Buy since the relevant cost to make it is$32.

## General guidance

Concepts and reason

Relevant Requireing: It is the message used in managerial accounting which describes the require that can be avoided in making the office judgments. The unnecessary postulates which compel the arrangement of judgment making perplexed are avoided in computing the bearing require.

Irbearing requires: Irbearing requires are the requires that irbearing restraint the judgment analysis. It implies these requires do referable attributable attributable attributable fluctuate according to the non-interference chosen.

Decomposed require: Decomposed requires are those requires which get happen irrespective of the judgment been real or referable attributable attributable. Fundamentals

Straightforward representative: Straightforward representatives are the crude representatives, which are instantly allied with the fruit of the result.

Direct work: Workers or employees instantly compromised in the manipulation of result and services are denominated the straightforward work. Straightforward work can be instantly traceable to a restricted fruit or require hardihood. In other vote, the require of the workers is instantly compromised in the alteration of the crude representative into the artistic fruit.

Overheads: The requires which do referable attributable attributable attributable detail instantly with the manufacturing of fruits, are referred to as over requires or instraightforward requires.

Compel or Purchase judgment analysis: Compel the fruit resources manufacturing the fruit by the manipulationr himself. Purchase the fruit resources purchasing the fruit from beyondr instead of manufacturing it. If require of purchaseing a fruit from beyond supplier is past than whole bearing require, then judgment should be fascinated as fruit to be manipulationd and vice-versa. Show short First Step | All Steps | Answer Only

## Step-by-step

### Step 1 of 2

Calculate the decomposed require in the compel or purchase judgment as shown below:

Sunkcost=Overheadcost×%tobeincurredirrespectiveoftheoptionchosen=$40perunit×60%=$24perunit\begin{array}{c}\\{\rm{Sunk require = Over require }} \times {\rm{ \% to be meetred irrespective of the non-interference clarified}}\\\\{\rm{ = \$40 per part }} \times {\rm{ 60\% }}\\\\{\rm{ = \$ 24 per part}}\\\end{array}Sunkcost=Overheadcost×%tobeincurredirrespectiveoftheoptionchosen=$40perunit×60%=$24perunit​

Thus, the decomposed require in the compel or purchase judgment is.Explanation | Hint restraint next step

Sunk require is the requires meetred irrespective of the non-interference clarified. In the present occurrence, the sodality get meet 60% of its over smooth it purchases from beyond supplier. Hence, the decomposed require is conducive by multiplying the over require with the % to be meetred irrespective of the non-interference chosen.