Sardi Incorporated Is Considering Whether to Continue to Make a Component

question 97

Multiple Choice

Sardi Incorporated is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 14,200 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows: Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 30% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 1 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 2 minutes on this machine and that has a contribution margin of $6.40 per unit.When deciding whether to make or buy the component, what cost of making the component should be compared to the price of buying the component? (Round your intermediate calculations to 2 decimal places.)

• A) $27.80 per unit
• B) $24.00 per unit
• C) $21.24 per unit
• D) $24.44 per unit

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Definitions:

Experiential Approach

A therapeutic technique focusing on individuals' personal experiences and emotions as a basis for understanding and addressing psychological issues.

Psychological Services

Professional services that focus on the assessment, diagnosis, treatment, and prevention of mental health issues, provided by psychologists or other qualified health professionals.

High Functioning

Describes individuals with mental health issues or developmental disorders who can perform daily tasks without significant impairment.

Mild Depression

A form of depression that is less severe than major depressive disorder, characterized by persistent sadness and loss of interest, but not significantly impairing daily function.