Bovee Company Manufactures a Part for Its Production Cycle

question 5

Multiple Choice

Bovee Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
The fixed factory overhead costs are unavoidable.
-Assume that Bovee can buy 10,000 units of the part from another producer for $112 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $40 per unit. No additional fixed costs would be incurred. Bovee should

• A) make the new product and buy the part to earn an extra $8 per unit contribution to profit.
• B) continue to make the part to earn an extra $8 per unit contribution to profit.
• C) continue to make the part to earn an extra $24 per unit contribution to profit.
• D) make the new product and buy the part to earn an extra $24 per unit contribution to profit.

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Definitions:

Liability For Mistake

A legal principle that holds parties accountable for errors that result in a breach of contract or harm to another party.

Personal Liability

The legal responsibility of an individual to assume financial obligations or compensate for wrongful acts.

Uniform Partnership Act

Legislation adopted by various states in the U.S. to provide a consistent legal framework governing the operation of partnerships.

Allocation Of Personal Liability

The process of assigning responsibility to individuals for their actions or obligations, particularly in a legal or financial context.