Cardinal Company Needs 20,000 Units of a Certain Part to Use

question 27

Multiple Choice

Cardinal Company needs 20,000 units of a certain part to use in one of its products.The following information is available: Oriole Company has offered to sell this part to Cardinal company for $36 each.If Cardinal buys the part from Oriole instead of making it,Cardinal would not have any use for the released capacity.In addition,60% of the fixed manufacturing overhead costs will continue regardless of what decision is made.Assume that direct labour is an avoidable cost in this decision.In deciding whether to make or buy the part,the total relevant costs to make the part are:

• A) $560,000.
• B) $640,000.
• C) $720,000.
• D) $760,000.

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Definitions:

Passenger Compartment

The section of a vehicle intended for the seating and protection of passengers.

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An acronym for heating, ventilation, and air conditioning system, which provides heating and cooling to residential and commercial buildings.

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Loose or packed soil or earth; in a mechanical context, it can refer to unwanted particulate matter that can cause wear or contamination.

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A defective device that fails to regulate temperature properly, leading to heating or cooling systems operating erratically.