Question
Use the information below to answer the following question(s): Spahr 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): Spahr 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 5,000 units, are as follows: Direct materials $2.00 Direct labour $4.00 Variable manufacturing overhead 2.00 Fixed manufacturing overhead $1.00 Total cost $9.00 The fixed overhead costs are unavoidable. 4. Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do? a. Make the part and save $1 per unit. b. Make the part and save $3 per unit. c. Buy from Erickson and save $1 per unit. d. Make the part and save $5 per unit. 5. Assuming no other use for its facilities, what is the highest price per unit that Spahr Company should be willing to pay for the part? a. $10 b. $8 c. $12 d. $6
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