Burt Company Currently Produces 10,000 Units of a Key Part

question 34

Multiple Choice

Burt Company currently produces 10,000 units of a key part at a total cost of $210,000. Variable costs are $170,000. Of the fixed cost, $10,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part for $190 per unit. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $25,000. Alternately, the facilities could be rented out at $55,000. is the opportunity cost to Burt Company for making the part.

• A) ($20,000)
• B) $25,000
• C) $55,000
• D) ($10,000)

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Definitions:

Cashier's Check

A check issued by a bank, drawn on its own funds rather than that of a personal account, ensuring the availability of funds.

Drawer

The party that writes or creates a bill of exchange, such as a check, directing a drawee to pay a specified sum to a payee.

Drawee

The party, typically a bank, upon whom a check or draft is drawn and is expected to pay the stated amount.

Drawer

The party that writes and signs a negotiable instrument, such as a check, instructing a drawee (often a bank) to pay a specified sum to a payee.