Question
Landry's Inc. produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units
Landry's Inc. produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
Direct materials $ 90,000
Direct labor 130,000
Variable factory overhead 60,000
Fixed factory overhead 140,000
Total costs $420,000
Of the fixed factory overhead costs, $60,000 is avoidable.
Cooper Company has offered to sell 10,000 units of the same part to Landry's Inc for $36 per unit. Assuming there is no other use for the facilities, Landry's should ________.
a. buy the part, as this would save $6 per unit
b. buy the part, as this would save the company $60,000
c. make the part, as this would save $2 per unit
d. make the part, as this would save $6 per unit
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