Clinton Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable

question 58

Multiple Choice

Clinton Company manufactures a part for its production cycle.The costs per unit for 10,000 units of this part are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 20 \\\text { Directlabor } & 15 \\\text { Variable factory overhead } & 16 \\\text { Fixed factory overhead } & 10 \\\text { Total costs } & \$ 61\end{array}$ The fixed factory overhead costs are unavoidable.Wilson Company has offered to sell 10,000 units of the same part to Clinton Company for $55 a unit.Assuming no other use for the facilities, Clinton Company should _____.

• A)make the part to save $4 per unit
• B)buy from Wilson to save $6 per unit
• C)make the part to save $6 per unit
• D)buy from Wilson to save $4 per unit

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