Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

11. Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming

image text in transcribed
11. Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows: $4 $3.0 ariable manufacturing overhead ixed manufacturing overhead Total cost In each scenario below, all of the fixed manufacturing overhead costs would continue whether the part is made internally or purchased from an outside supplier. Also, Suri Company has offered to sell 6,000 units of the same part to Cruise Company for $14 per unit. Given these circumstances, what should Cruise Company do in each of the three different scenarios below: A. If Cruise Company has no alternative use for its manufacturing facilities: 1) 2) 3) Should Cruise Company make the part or outsource the part? How much per unit will they save by the decision from #1? What is the highest price per unit that Cruise Company should be willing to pay for the part? B. If the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year: 4) Should Cruise Company make or outsource the part? 5) How much per unit will they save by the decision from #4? C. Assume that the facilities currently used to make the part could be used to manufacture 6,000 units of another produet that would have an 58 per unit eontribution margin. If no additional fixed costs would be incurred: 6) Should Cruise Company make or outsource the part? 7) How much per unit will they save by the decision fron #6

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting

Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker

10th edition

78025621, 978-0078025624

More Books

Students also viewed these Accounting questions