Why is the production of accounting records important?

Managerial accounting please help! 10pts to best answer!?

• The Norran Company needs 15,000 units of a certain part to use in its production cycle. If Norran buys the part from Waterloo Company instead of making it, Norran could not use the released facilities in another activity; thus, all of the fixed overhead applied will continue regardless of what decision is made. Accounting records provide the following data: Cost to Norran to make the part: Direct materials, $3 Direct labor, $12 Variable overhead, $13 Fixed overhead applied, $8 Cost to buy the part from the Waterloo Company, $27 What should Norran's decision be, and what is the total cost savings that would result? A) Buy, $90,000 B) Buy, $15,000 C) Make, $90,000 D) Make, $15,000

• Answer:

  Since the fixed overhead is not affected by the Buy/Make decision, we add up all the other costs and that is $28/unit to make the part. Since we can buy the part for $1 cheaper the decision should be to BUY the part and they save $15,000 on 15,000 units and your answer is B.