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 6,000 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. Suri Company has offered to sell 6,000 units of the same part to Cruise Company for $14 per unit. Assuming the company has no other use for its facilities, what should Cruise Company do? A. Buy from Suri and save $2 per unit. B. Make the part and save $6 per unit. C. Make the part and save $3 per unit. D. Make the part and save $10 per unit.
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