Cruise Company Produces a Part That Is Used in the Manufacture

question 64

Multiple Choice

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows: Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $14.00 each, and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $8 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?

• A)Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit.
• B)Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit.
• C)Continue to make the part to earn an extra $2.00 per unit contribution to profit.
• D)Continue to make the part to earn an extra $4.00 per unit contribution to profit.

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Definitions:

Task Interdependence

The extent to which the work of one member of a group or organization is reliant on the work of others within the group or organization.

Autonomous Work Groups

Teams organized around completing an entire piece of work with a high degree of autonomy in decision-making and execution.

Decision-Making Authority

The power or right bestowed upon individuals or groups to make choices that will influence outcomes and actions.

Social Messaging

The use of social media platforms and applications to communicate, share content, and interact with a broad or targeted audience.