Guillory Company Produces a Part That Has the Following Costs

question 21

Multiple Choice

Guillory Company produces a part that has the following costs per unit: Homeland Corporation can provide the part to Guillory for $23 per unit. Guillory Company has determined that 50 percent of its fixed overhead would continue if it purchased the part. However, if Guillory no longer produces the part, it can rent that portion of the plant facilities for $70,000 per year. Guillory Company currently produces 12,000 parts per year. Which alternative is preferable and by what margin?

• A) Make-$24,000
• B) Make-$60,000
• C) Buy-$10,000
• D) Buy-$46,000

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Definitions:

Import

The act of bringing goods or services into one country from another for the purpose of trade.

Trade Surplus

The difference between a nation's exports and imports when exports exceed imports.

Trade Deficit

A measure of international trade in which a country's imports exceed its exports.

Net Exports

A country's economic output's net impact from international trade, calculated as the difference between its total exports and total imports.