Christian Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are as follows: Per Unit Direct materials $3.00 Direct labor 5.00 Variable factory overhead 4.00 Fixed factory overhead 2.00 Total costs $14.00 The fixed factory overhead costs are unavoidable. Another company has offered to sell 5,000 units of the same part to Christian Company for $15 per unit. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Christian Company should ________. A) make the part to save $5,000 B) make the part to save $15,000 C) buy the part and rent facilities to save $5,000 D) buy the part and rent facilities to save $15,000
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Christian Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 4.00
Fixed factory overhead 2.00
Total costs $14.00
The fixed
- A) make the part to save $5,000
- B) make the part to save $15,000
- C) buy the part and rent facilities to save $5,000
- D) buy the part and rent facilities to save $15,000
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