Cruise Company Produces a Part That Is Used in the Manufacture

question 25

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:

Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $14 each,and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year,what should Cruise Company do?

• A)Make the part and save $6.00 per unit.
• B)Make the part and save $2.00 per unit.
• C)Buy the part and save $2.00 per unit.
• D)Buy the part and save $1.00 per unit.

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Definitions:

Transfer Payments

Payments made by governments to individuals without any expectation of a good or service being provided in return, such as social security benefits and unemployment benefits.

Excise Tax

A tax levied on specific goods, services, or transactions, often focused on items such as alcohol, tobacco, and gasoline.

Demand Curves

A graph showing the relationship between the price of a good and the quantity of that good that consumers are willing to buy at different prices.

Supply Curves

Graphical representations showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell.