Answer Happy

Make or Buy: ABC Inc. is a car manufacturing company. The company studying the possibility of manufacturing cars batteries by using their unused capacity. The financial manager prepared the following information to help the management to make the decision: Number of required chips 120,000 batteries Total costs: DM $1,200,000 DL $960,000 V. OH $600,000 F. OH $1,800,000 F. Administrative expense $360,000 The company gets an offer from external supplier to provide the 120,000 batteries at $35 per battery. Required: Do you advise the company to accept the offer of the external supplier or manufacture the batteries internally, taking into consideration that if the company does not manufacture the batteries 50% of the F. OH and 750% of the F. Admin costs will not change?