If Elly industries is able to obtain part MR24 from an outside supplier at a purchase price of $10 per unit, the monthly financial advantage (disadvantage) of buying the part rather than making it would be:

A) $30,000
B) $180,000
C) $90,000
D) $120,000

The cost to buy the part would be 30,000 units × $10 per unit = $300,000.The company would save $120,000.
Reference: CH11-Ref12
Melbourne Corporation has traditionally made a subcomponent of its major product.Annual production of 30,000 subcomponents results in the following costs: Melbourne has received an offer from an outside supplier who is willing to provide the 30,000 units of the subcomponent each year at a price of $28 per unit.Melbourne knows that the facilities now being used to manufacture the subcomponent could be rented to another company for $80,000 per year if the subcomponent were purchased from the outside supplier.There would be no effect of this decision on the total fixed manufacturing overhead of the company.Assume that direct labor is a variable cost.