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:

Net Income

The amount of money left over after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue.

End-of-Period Spreadsheets

Tools used in accounting to compile financial information at the end of an accounting period, aiding in the preparation of financial statements.

Current Ratio

A financial metric indicating a firm's capability to settle short-term debts due within a year, derived by dividing current assets by current liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.