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 4.00 Fixed manufacturing overhead $2.00 Total cost $12.00 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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