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Home Q & A Board Other Fields Homework Help Business Accounting
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bernie2981 bernie2981
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8 years ago
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 labor   $4.00
Variable manufacturing overhead   $3.00
Fixed manufacturing overhead   $1.00
Total cost   $12.00
The fixed overhead costs are unavoidable.   

Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $14 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) Buy the part and save $2.00 per unit.
C) Make the part and save $2.00 per unit.
D) Buy the part and save $1.00 per unit.
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Managerial Accounting

Managerial Accounting


Edition: 4th
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nucleinuclei
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8 years ago
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bernie2981 Author
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#2
8 years ago
You're such a dedicated member, I very much appreciate the help.

Marking this solved ✓
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#3
8 years ago
Quote from: bernie2981 (8 years ago)
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 labor   $4.00
Variable manufacturing overhead   $3.00
Fixed manufacturing overhead   $1.00
Total cost   $12.00
The fixed overhead costs are unavoidable.   

Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $14 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) Buy the part and save $2.00 per unit.
C) Make the part and save $2.00 per unit.
D) Buy the part and save $1.00 per unit.

what do you do with the $24000??
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