Speck Company Manufactures a Part for Its Production Cycle

question 45

Multiple Choice

Speck 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 Speck can buy 10,000 units of the part from another producer for $28 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $10 per unit. No additional fixed costs would be incurred. Speck should

• A) make the new product and buy the part to earn an extra $6 per unit contribution to profit.
• B) make the new product and buy the part to earn an extra $2 per unit contribution to profit.
• C) continue to make the part to earn an extra $2 per unit contribution to profit.
• D) continue to make the part to earn an extra $6 per unit contribution to profit.

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Definitions:

Payroll Taxes Deposits

Payments made by employers to the IRS or other tax authorities for taxes withheld from employees' wages, including Social Security and Medicare taxes.

Lookback Period

The lookback period is a defined timeframe in the past during which certain events or transactions are reviewed for tax or regulatory compliance purposes.

TIN

Taxpayer Identification Number; a unique identifier assigned by the Internal Revenue Service or Social Security Administration to track taxpayers and accounts.

W-9 Forms

A request for taxpayer identification number and certification, used in the United States to provide information to entities that pay you income.