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

question 67

Multiple Choice

Kennedy Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows: $\begin{array}{ll}\text { Direct materials } & \$ 20 \\\text { Direct labor } & 15 \\\text { Variable factory overhead } & 16 \\\text { Fixed factory overhead } & \underline{10} \\\text { Total costs } & \$ 61\end{array}$ The fixed factory overhead costs are unavoidable. Assume that Kennedy Company can buy 10,000 units of the part from another producer for $60 each. The facilities currently used to make the part could be rented out to another manufacturer for $100,000 a year. Kennedy Company should:

• A) make the part to save $2.50 per unit
• B) buy the part to save $2.50 per unit
• C) make the part to save $1 per unit
• D) buy the part to save $1 per unit

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Definitions:

Dominant Values

The most highly regarded and influential beliefs or standards of a society or group, guiding behavior and societal norms.

Taboos

Social or cultural prohibitions or restrictions on certain behaviors, practices, or discussions, often considered sacred or forbidden.

Postmodern Condition

A term describing the societal state or cultural dynamics in which traditional norms and structures are questioned or rejected, emphasizing skepticism and relativism.

Consensus Building

A process or method aimed at achieving agreement or accord among group members or different stakeholders.