Business, 17.06.2020 20:57, dommalb

Pentagon Corporation uses pressure pumps in the production of RO filters. The unit manufacturing costs for the pressure pumps are: Direct materials $12
Direct labor 3
Variable overhead 1
Fixed overhead 5
Pentagon uses 120,000 units of pressure pumps per year.

Hexagon Corporation has offered to sell Pentagon 120,000 units of pressure pumps per year for $17 each. Fixed overhead is unavoidable. Should Pentagon manufacture the pressure pumps or buy them from Hexagon Corporation?

a. Pentagon should buy the pressure pumps because it will save $120,000.
b. Pentagon should buy the pressure pumps because it will save $480,000.
c. Pentagon should make the pressure pumps because it will save $120,000.
d. Pentagon should make the pressure pumps because it will save $480,000.

Answers: 1

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Pentagon Corporation uses pressure pumps in the production of RO filters. The unit manufacturing cos...