Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 6,000 units, are as follows:

Direct Materials - $4.00

Direct Labor - $4.00

Variable Manufacturing Overhead - $3.00

Fixed Manufacturing Overhead - $1.00

Total Cost - $12.00

The fixed overhead costs are unavoidable.

Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $14 each, and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year, what should Cruise Company do?

A) Make the part and save $6.00 per unit.

B) Make the part and save $2.00 per unit.

C) Buy the part and save $2.00 per unit.

D) Buy the part and save $1.00 per unit.

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

Law, Business And Society

Authors: Tony McAdams, Kiren Dosanjh Zucker, Kristofer Neslund, Kari Smoker

12th Edition

1259721884, 978-1259721885

More Books

Students also viewed these Accounting questions

Question

Have I allowed for this item in my budget?

Answered: 1 week ago

Question

An improvement in the exchange of information in negotiations.

Answered: 1 week ago