Use the Following Information for Questions
Truckel, Inc -Saran Company Has Contacted Truckel with an Offer to Sell

question 96

Multiple Choice

Use the following information for questions
Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: $\begin{array}{lr}\text { Direct materials and direct labor } & \$ 11 \\\text { Variable overhead } & 5 \\\text { Fixed overhead } & 8\\\text { Total }&\$24\end{array}$
-Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Truckel make or buy the wickets?

• A) Buy; savings = $15,000
• B) Buy; savings = $5,000
• C) Make; savings = $10,000
• D) Make; savings = $5,000

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Definitions:

Merchandise Inventory

Merchandise inventory includes goods that a company intends to sell in the ordinary course of business, calculated at the cost of acquiring the goods.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Service Company

A business that provides intangible products or services to customers rather than physical goods.

Operating Cycle

The period it takes for a business to buy inventory, sell products, and generate cash from operations.