A company produces 300 microwave ovens per month, each of which includes one electrical circuit
The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract cost of $34 each. Currently, the cost of producing circuits in-house includes variable costs of $28 per circuit and fixed costs of $5,000 per month. The controller says that they could outsource production of the circuit, if it reduces fixed cost more than $1,800 per month. Is this statement true or false?
Indicate whether the statement is true or false
TRUE .In-house Outsource
Variable cost $8,400 $10,200
Less: Fixed cost reduction $1,800
Total relevant cost $8,400 $8,400
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