Question
McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 15,000 units
McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of
15,000
units of this part are as follows:
Direct materials | $85,000 | |
Direct labor | 127,000 | |
Variable factory overhead | 56,000 | |
Fixed factory overhead | 135,000 | |
Total costs | $403,000 |
Of the fixed factory overhead costs,
$59,000
is avoidable. Conners Company has offered to sell
15,000
units of the same part to McMurphy Corporation for
$38
per unit.
Assuming there is no other use for the facilities, Schmidt should ________. (Round any intermediate calculations to the nearest dollar.)
A.
make the part, as this would save
$19
per unit
B.make the part, as this would save
$16
per unit
C.buy the part, as this would save
$19
per unit
D.
buy the part, as this would save the company
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started