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

question 91

Multiple Choice

Hoover 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. Madison Company has offered to sell 10,000 units of the same part to Hoover Company for $55 a unit. Assuming no other use for the facilities, Hoover Company should:

• A) make the part to save $4 per unit
• B) buy from Madison to save $6 per unit
• C) buy from Madison to save $4 per unit
• D) make the part to save $6 per unit

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Definitions:

PTSD

Post-Traumatic Stress Disorder is a psychological condition initiated by exposure to or witnessing traumatic incidents, marked by recurrent flashbacks, nightmares, and intense anxiety.

Danger-Detection

The cognitive and physiological process of identifying potential threats in the environment, enabling an organism to respond to hazardous situations.

Major Depressive Disorder

A mental disorder characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities.

Personal Worthlessness

A cognitive condition where an individual perceives themselves to have no value or importance.