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Question(s) / Instruction(s):

Alpha Co. can produce a unit of Beta for the following costs:

Direct material                                                                  $8

Direct Labor                                                                        $24

Overhead                                                                            $40

Total Cost per Unit                                                          $72

An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:

a)            Buy Beta since the relevant cost to make it is $72.

b)            Make Beta since the relevant cost to make it is $56.

c)            Buy Beta since the relevant cost to make it is $48.

d)            Make Beta since the relevant cost to make it is $48.

e)            Buy Beta since the relevant cost to make it is $56.

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