Refrigerator Company manufactures ice-makers for installation in refrigerators. The costs per unit, for 20,000 units of ice-makers, are as follows.
Cool Compartments Inc. has offered to sell 20,000 ice-makers to Refrigerator Company for $28 per unit. If Refrigerator accepts Cool Compartments' offer, the facilities used to manufacture ice-makers could be used to produce 20,000 water filtration units. Revenues from the sale of water filtration units are estimated at $80,000, with variable costs equal to 60% of sales. In addition, $6 per unit of the fixed overhead associated with the manufacture of ice-makers could be eliminated.
What are the relevant costs involved for Refrigerator Company to make the ice-makers internally or to buy them externally from Cool Compartments, Inc.?
The answer for this question in the Wiley test bank is $632,000 vs. $560,000.
In the CMA exam support package, the answer is $600,000 vs. $528,000.
Which approach is right? Should the contribution received from the water filters be included as a relevant cost to make or buy?
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