ABC Company has been producing its own widgets that are used in manufacturing its final product. The cost of manufacturing 10,000 widgets is summarized below.

Direct materials

$20,000

Direct labor

16,000

Variable factory overhead

9,000

Fixed factory overhead

15,000

Total manufacturing costs

$60,000

A supplier offers to produce the widgets that ABC needs for $5.30 plus freight costs of $0.50 per widget. If the company decides to buy from the supplier, 60% of the fixed factory overhead which represents depreciation and insurance costs will still continue. 40% will be avoided.

a.) Should the company continue to make the widget or purchase it from the outside supplier? 

How can we slove as detailed work in managerial economics subject chapter 4 and 5