Green Manufacturing Makes 30,000 Units Per Year of a Part

question 11

Multiple Choice

Green Manufacturing makes 30,000 units per year of a part used in the manufacture of its new camcorder. An outside supplier has offered to sell Green the part for $48 a unit. If the part was purchased from the supplier, all of the direct labor costs would be avoided as well as $5 of the manufacturing overhead cost per unit. Product cost information for the part under review is as follows:
$\begin{array}{lr}\text { Direct Materials}&\$18\\\text { Direct Labor}&\$24\\\text { Manufacturing overhead}&\$16\\\text { Unit product cost}&\$58\\\end{array}$

How much of the unit product cost is relevant in the decision of whether to make or buy the part?

• A)$58.
• B)$42.
• C)$47.
• D)$40.

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Definitions:

Conners 3

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