Scott Corporation produces a part for use in the production of one of its products. The per-unit costs associated with the annual production of 1,000 units of this part are as follows:

\($5,000\) of the fixed factory overhead costs associated with the production of this product are common fixed costs. Larson Company has offered to sell 1,000 units of the same part to Scott Corporation for \($42\) per unit. Scott should:

a. buy the part, because this would save \($10.00\) per unit.

b. buy the part, because this would save the company \($5,000\) annually.

c. make the part, because this would save \($2.00\) per unit.

d. make the part, because this would save the company \($5,000\) annually.

Transcribed Image Text:

Direct materials. Direct labor. Variable factory overhead.. Fixed factory overhead.. Total costs. $10.50 $24.00 $ 5.50 $12.00 $52.00