Question
Use the information below to answer the following question(s): Cruise Company produces a part that is used in the manufacture of one of its products.
Use the information below to answer the following question(s): 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 labour $4.00 Variable manufacturing overhead $3.00 Fixed manufacturing overhead $1.00 Total cost $12.00 The fixed overhead costs are unavoidable. 6. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $9 each, and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year, what should Cruise Company do? a. Make the part and save $6.00 per unit. b. Make the part and save $2.00 per unit. c. Buy the part and save $2.00 per unit. d. Buy the part and save $6.00 per unit. 7. Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $14.00 each, and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $8 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do? a. Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit. b. Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit. c. Continue to make the part to earn an extra $2.00 per unit contribution to profit. d. Continue to make the part to earn an extra $4.00 per unit contribution to profit.
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