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:

Axis

A reference line used in graphs and charts to indicate values of variables.

Stem-and-Leaf Display

A graphical method of displaying quantitative data to show its shape and distribution, combining aspects of a histogram and scatter plot.

Data Set

A collection of data points or values related to a subject.

Leaf

In the context of data representation, a part of a stem-and-leaf plot representing the smallest significant digit of data points.