Garcia Company Produces a Part That Is Used in the Manufacture

question 22

Multiple Choice

Garcia 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: $\begin{array}{lr}\text { Direct materials } & \$ 108,000 \\\text { Direct labor } & 156,000 \\\text { Variable factory overhead } & 72,000 \\\text { Fixed factory overhead } & 168,000 \\\text { Total costs } & \$ 504,000\end{array}$ Of the fixed factory overhead costs, $72,000 is avoidable.Assume that Garcia Company can buy 5,000 units of the part from another producer for $105.60 each.The facilities currently used to make the part could be rented out to another manufacturer for $72,000 a year.Garcia Company should _____.

• A)make the part to save $19.20 per unit
• B)make the part to save the company $48,000
• C)buy the part to save $14.40 per unit
• D)buy the part to save the company $72,000

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Definitions:

Renal Calculus

A solid mass made of crystals, also known as a kidney stone, that originates in the kidneys but can travel down the urinary tract, causing pain and potential obstruction.

Narcotic Medications

Drugs that act on the central nervous system to relieve pain, often with potential for dependency and misuse.

Continent Urinary Reservoir

A surgically created internal pouch to collect and store urine in patients who have had their bladder removed, allowing controlled urination.

Self-Cath

A technique for emptying the bladder by inserting a catheter (tube) into the urethra, typically done by the patient themselves.