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:

Payable

Refers to an amount of money that is owed by a person or company and is required to be paid to another party.

Bearing Them

Taking responsibility for or dealing with something, often implying a burden or hardship that must be endured.

Transferable

Characteristic of an item, right, or obligation, that allows it to be passed from one party to another, often involving legal documentation.

Negotiable

Capable of being bought, sold, or transferred to another party, often used to describe financial instruments.