Pett Company Produces a Part That Is Used in the Manufacture

question 2

Multiple Choice

Pett 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, $15,000 is avoidable.
-Assume that Pett can buy 5,000 units of the part from another producer for $22 each. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Pett should

• A) make the part as that would save $4 per unit.
• B) make the part as that would save the company $5,000.
• C) buy the part as that would save $3 per unit.
• D) buy the part as that would save the company $20,000.

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Definitions:

Decision-making Process

The systematic series of steps taken to identify and choose the best action from a set of alternatives.

Modified Solution

An adjusted or altered answer or resolution to a problem that takes into account new or additional information.

Decision-making Process

The series of steps taken to identify and choose alternative solutions to a problem, leading to a final choice and action.

Implement the Decision

The process of carrying out choices or plans of action to achieve a desired goal.