Question
Plainfield Company manufactures part G for use in its production cycle. The full cost per unit for each of 11,000 units of part G are
Plainfield Company manufactures part G for use in its production cycle. The full cost per unit for each of 11,000 units of part G are as follows:
Direct materials | $4 |
Direct labor | 9 |
Variable overhead | 6 |
Fixed overhead | 7 |
$26 |
Verona Company has offered to sell Plainfield 11,000 units of part G for $27 per unit. If Plainfield accepts Verona's offer, the released facilities could be used to save $43,000 in relevant costs in the manufacture of part H. In addition, $5 per unit of the fixed overhead applied to part G would be eliminated. Which alternative is more desirable and by what amount?
Alternative | Amount | |
A) | Manufacture | $10,000 |
B) | Manufacture | $15,000 |
C) | Buy | $35,000 |
D) | Buy | $65,000 |
E) | Buy | $10,000 |
Group of answer choices
Option C
Option A
Option E
Option D
Option B
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