managerial accounting 457646

Textel is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows:

Direct Material $45,000

Direct Labor 30,000

Factory overhead (1/3 is variable) 98,000

If Textel can buy 1,000 units from a subcontractor for $100,000, it should:

Make the product because current factory overhead is less than $100,000.

Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.

Buy the product because the total incremental costs of manufacturing are greater than $100,000.

Buy the product because total fixed and variable manufacturing costs are greater than $100,000.

Make the product because factory overhead is a sunk cost.