A business makes two componentes which it uses to produce one of its products. Details are:

A business makes two componentes which it uses to produce one of its products. Details are:

                                                                                             Component A                  Component B

Per unit information                                                                    $                                            $

Buy in price                                                                                 9                                            13

Material                                                                                       2                                            4

Labour                                                                                         3                                            5

Variable overheads                                                                     5                                            6

General fixed overheads                                                             3                                            2

Total absortion cost                                                                     13                                          17

The business wishes to maximize contribution and is considering whether to continue making the componentes internally or buy in from ouside.

Which componentes should the company buy in from outside in order to maximize its contribution?

A)     A only

B)     Neither A nor B

C)     Both A and B

D)     B only