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JPM Co has limited factory capacity measured in labour hours and a decision must be made whether to make or buy product L. Supplies of L can be purchased for $12 per unit. If L is made by JPM Co, each unit would cost $5 in raw materials and would require 3 labour hours. Labour is paid at $1.50 per hour. Labour is currently working to capacity making product C, which earns a contribution of $2 per unit, each unit needing five labour hours. Which of the following statements is true? A. JPM Co should be indifferent between making or buying product L since the labour will be fully utilised in any case. B. JPM Co should make product L because it is $2.50 per unit cheaper than purchasing product it. C. JPM Co should make product L because it is $1.30 per unit cheaper than buying it. D. JPM Co should buy product L because it is $7.50 per unit cheaper than making it. |