Miller Company Produces a Part That Is Used in the Manufacture

question 63

Multiple Choice

Miller Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows: D $\begin{array}{ll}\text { Direct materials } & \$ 108,000 \\\text { Direct labor } & 156,000 \\\text { Variable factory overhead } & 72,000 \\\text { Fixed factory overhead } & \underline{168,000} \\\text { Total costs } & \underline{\$ 504,000} \\\end{array}$ Of the fixed factory overhead costs, $72,000 is avoidable. Assume that Miller Company can buy 5,000 units of the part from another producer for $100.80 each. The current facilities could be used to make 5,000 units of a product that has a contribution margin of $24 per unit. Fixed factory overhead costs to produce this new product would be exactly the same as for the currently produced part. Miller Company should:

• A) continue to make the part and earn an extra $4.80 per unit contribution to profit
• B) buy the part and produce the new product and earn an extra $4.80 per unit contribution to profit
• C) continue to make the part and earn an extra $48,000 in profit
• D) buy the part and produce the new product and earn an extra $24 per unit contribution to profit

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Definitions:

Biased Language

Language that shows prejudice, preference, or partiality towards a particular viewpoint, group, or idea, often resulting in unfair representation.

Neutral Language

Language that is unbiased, does not express opinions, and aims to avoid offending or alienating any group of people.

"You" Attitude

A communication approach that focuses on the audience's needs and perspectives, often used to create a more engaging and persuasive message.

Perception

The process by which individuals interpret and organize sensory information to understand the environment.