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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 6300 units, are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost The fixed overhead costs are unavoidable. $4.10 $4.40 $3.30 $1.20 $13.00 Assume Cruise Company can purchase 6300 units of the part from Suri Company for $14.30 each, and the facilities currently used to make the part could be used to manufacture 6300 units of another product that would have an $9 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do? Make the new product and buy the part to earn an extra $5.30 per unit contribution to profit. Continue to make the part to earn an extra $2.10 per unit contribution to profit. Make the new product and buy the part to earn an extra $6.50 per unit contribution to profit. Continue to make the part to earn an extra $4.00 per unit contribution to profit
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