Aspen Inc., manufactures 10,000 computer chips. Currently, the costs per unit are as follows:
C/U Total Cost
Direct materials $ 1.00 10000
Direct labor 10.00 100000
Variable overhead 5.00 50000
Fixed overhead 8.00 80000
Total $24.00 240000
Link, Corp., has contacted Aspen with an offer to sell 10,000 of the chips for $22.00 per chip. If Aspen accepts the proposal, $30,000 of fixed overhead will be eliminated.
Should Aspen make or buy the chips? What is the difference between the two alternatives?
a. Buy; savings = $20,000.
b. Buy; savings = $50,000.
c. Make; savings = $30,000.
d. Make; savings = $10,000.
e. none of the above
