Cruise Company Produces a Part That Is Used in the Manufacture

question 240

Multiple Choice

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6300 units, are as follows: Assume Cruise Company can purchase 6300 units of the part from Suri Company for $14.30 each, and the facilities currently used to make the part could be used to manufacture 6300 units of another product that would have an $9 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?

• A)Make the new product and buy the part to earn an extra $6.50 per unit contribution to profit.
• B)Make the new product and buy the part to earn an extra $5.30 per unit contribution to profit.
• C)Continue to make the part to earn an extra $2.10 per unit contribution to profit.
• D)Continue to make the part to earn an extra $4.00 per unit contribution to profit.

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Definitions:

General Partner

In a partnership, the partner who has unlimited liability for the debts of the business and takes part in the management of the business.

LLLP

stands for Limited Liability Limited Partnership, a form of partnership that combines the elements of limited partnerships and limited liability partnerships, providing limited liability to all its partners.

General Partner

A member of a partnership who has unlimited personal liability for the debts and obligations of the partnership, and who has the authority to act on behalf of the partnership in management matters.

Limited Partnership

A form of partnership consisting of at least one general partner who manages the business and is personally liable for partnership debts, and one or more limited partners who provide capital and whose liability is limited to the amount of their investment.