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

question 136

Multiple Choice

Finch Company manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: $\begin{array}{ll}\text { Direct materials } & \$ 3 \\\text { Direct labor } & 5 \\\text { Variable factory overhead } & 4 \\\text { Fixed factory overhead } & \underline{2} \\\text { Total costs } & \$ 14\end{array}$ The fixed factory overhead costs are unavoidable. Scalding Corporation has offered to sell 5,000 units of the same part to Finch Company for $15 a unit. Assuming no other use for the facilities, Finch Company should:

• A) buy from Scalding Corporation to save $3 per unit
• B) make the part to save $1 per unit
• C) make the part to save $3 per unit
• D) buy from Scalding Corporation to save $1 per unit

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Definitions:

Liable

Liable means being legally responsible or obligated to compensate for harm, damages, or loss resulting from one's actions or negligence.

Prosecuted

In legal context, it refers to the process of bringing charges against an individual or entity in a court of law.

Sufficient Funds

Having enough money available in an account to cover checks or withdrawals.

Forgery

The act of falsely making or altering a document with the intent to defraud.