Question
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
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 comma 300 ?units, are as? follows: Direct materials $ 4.50 Direct labor $ 4.50 Variable manufacturing overhead $ 3.20 Fixed manufacturing overhead $ 1.50 Total cost $ 13.70 The fixed overhead costs are unavoidable. Assume Cruise Company can purchase 6 comma 300 units of the part from Suri Company for $ 14.40 ?each, and the facilities currently used to make the part could be used to manufacture 6 comma 300 units of another product that would have an $ 9.00 per unit contribution margin. If no additional fixed costs would be? incurred, what should Cruise Company? do? A. Make the new product and buy the part to earn an extra $ 5.40 per unit contribution to profit. B. Continue to make the part to earn an extra $ 1.70 per unit contribution to profit. C. Continue to make the part to earn an extra $ 4.70 per unit contribution to profit. D. Make the new product and buy the part to earn an extra $ 6.80 per unit contribution to profit.
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