Cruise Company Produces a Part That Is Used in the Manufacture

question 254

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 6500 units, are as follows: Assuming Cruise Company can purchase 6500 units of the part from Suri Company for $14.00 each, and the facilities currently used to make the part could be rented out to another manufacturer for $25,000 a year, what should Cruise Company do?

• A)Make the part and save $6.00 per unit.
• B)Make the part and save $12.50 per unit.
• C)Buy the part and save $1.00 per unit.
• D)Buy the part and save $1.35 per unit.

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Definitions:

Income Statement

The Income Statement, also known as a profit and loss statement, is a financial report that shows a company's revenues, expenses, and profits or losses over a specific period.

Unearned Fees

Income received by a company for services or goods that have yet to be provided or delivered.

Supplies Expense

The cost incurred from acquiring supplies used in the operation of a business, not directly tied to production.

Adjusted Trial Balance

A compilation of every account along with its adjusted balances, utilized for the creation of financial reports.