(Management Accounting) Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow: Per Unit Direct materials $6.00 Direct labor...

(Management Accounting)

Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow:

                                                                            Per Unit

Direct materials                                                       $6.00

Direct labor                                                                4.00

Variable factory overhead                                         1.00

Fixed supervisor salary                                             3.00

Depreciation expense on factory equipment             2.00

General fixed factory overhead allocated                 5.00

Total costs                                                             $21.00

The above per unit costs are based on 8,000 units. An outside supplier will provide 8,000 subassemblies for $19 per unit. The supervisor will be terminated if the subassemblies are not produced in house. The idle factory will be used to manufacture another product with a contribution margin of $60,000. What should Bonneville do?

1. A) make the subassemblies and save $20,000


2. B) make the subassemblies and save $40,000


3. C) buy the subassemblies and save $20,000


4. D) buy the subassemblies and save $40,000