Make-or-Buy Decision uses 12,000 units of component DA each year. The cost per unit of this component is as follows: Assume that 80% of Arches Manufacturing's fixed overhead for component DA would be eliminated if that component were no longer produced. Required: house)? $x Which alternative is better? Purchase the component from Canyonlands 2. Conceptual Connection: Briefly explain how increasing or decreasing the 80% figure affects Arches's final decision to make or purchase the component. As the percentage of avoidable fixed cost increases (above 80% ), total relevant costs of making the component increase, causing the "purchase" decision to be financially increases resulting in the "purchase" decision being even attractive. Alternatively, as the percentage of avoidable fixed costs decreases, the "make" option eventually is costly and appealing financially as the "purchase" option. Finally, as the percentage of avoidable fixed cost decreases low enough and the total relevant costs of making the component decrease, the option becomes the more financially appealing option "purchasing" the component? Feedback
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