Question
Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of thispart, assuming a production
Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of thispart, assuming a production level of 6,300 units, are as follows:
Direct materials -- $ 4.00
Direct labor --$4.40
Variable manufacturing overhead -- $3.10
Fixed manufacturing overhead -- $1.10
Total cost -- $ 12.60
The fixed overhead costs are unavoidable.
Suri Company has offered to sell 6,300 units of the same part to Cruise Company for $14.00 per unit. Assuming the company has no other use for itsfacilities, what should Cruise Companydo?
A.
Make the part and save $2.50 per unit.
B.
Make the part and save $10.40 per unit.
C.
Buy from Suri and save $1.40 per unit.
D.
Make the part and save $6.00 per unit.
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