(Solved):Purchase price is $35 for a part that can be manufactured for $28 per unit; the $28 manufacturing…

 

Question

Purchase price is $35 for a part that can be manufactured for $28 per unit; the $28 manufacturing costs include $5 per-unit fixed cost. What is the savings to make rather than to buy?

 

EXPERT ANSWER

The calculated value of savings to make rather than to buy is $12 per unit.

The total cost of buying one unit of the part is given by:

  • = Purchase price per unit + fixed manufacturing cost per
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