Barker Company Produces a Part That Is Used in the Manufacture

question 17

Multiple Choice

Barker Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:
Of the fixed factory overhead costs, $60,000 is avoidable.
-Assume that Barker can buy 5,000 units of the part from another producer for $88 each. The facilities currently used to make the part could be rented out to another manufacturer for $80,000 a year. Barker should

• A) make the part as that would save $16 per unit.
• B) make the part as that would save the company $20,000.
• C) buy the part as that would save $12 per unit.
• D) buy the part as that would save the company $80,000.

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Definitions:

Adrenal Glands

are small glands located above the kidneys that produce a variety of hormones including adrenaline and steroids like cortisol.

Kidneys

Vital organs involved in filtering waste from the blood, regulating blood pressure, and maintaining electrolyte balance.

Hyperthyroidism

A condition caused by excessive secretion of the thyroid glands.

Irritability

A state of increased sensitivity or annoyance, typically as a reaction to external stimuli or personal stress.