Match Company Produces a Part That Is Used in the Manufacture

question 135

Multiple Choice

Match Company produces a part that is used in the manufacture of one of its products.The costs associated with the production of 5,000 units of this part are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 108,000 \\\text { Directlabor } & 156,000 \\\text { Variable factory overhead } & 72,000 \\\text { Fixed factory overhead } & 168,000 \\\text { Total costs } & \$ 504,000\end{array}$ Of the fixed factory overhead costs, $72,000 are avoidable.Match Company has offered to sell 5,000 units of the same part to Match for $86.40 per unit.Assuming there is no other use for the facilities, Match Company should _____.

• A)make the part to save $14.40 per unit
• B)buy the part to save $14.40 per unit
• C)buy the part to save the company $72,000
• D)make the part to save $4.80 per unit

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