Factor CoCan Produce a Unit of Product for the Following Costs

question 98

Multiple Choice

Factor Co.can produce a unit of product for the following costs: $$\begin{array}{l}\begin{array} { l l r } \text {Direct material }& \$8\\\text {Direct labor }&24\\\text {Overhead }&40\\\text {Total product costs per unit }&\$72\\\end{array}\end{array}$$ An outside supplier offers to provide Factor with all the units it needs at $46 per unit.If Factor buys from the supplier,the company will still incur 60% of its overhead.Factor should choose to:

• A)Buy since the relevant cost to make it is $56.
• B)Make since the relevant cost to make it is $48.
• C)Buy since the relevant cost to make it is $48.
• D)Make since the relevant cost to make it is $32.
• E)Buy since the relevant cost to make it is $32.

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Definitions:

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