Use the Information Below to Answer the Following Question(s)

question 54

Multiple Choice

Use the information below to answer the following question(s) :
Spahr 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 5,000 units, are as follows:

-Assume Spahr Company can purchase 5,000 units of the part from Allgood Company for $13.50 each, and the facilities currently used to make the part could be used to manufacture 5,000 units of another product that would have a $6 per unit contribution margin. If no additional fixed costs would be incurred, what should Spahr Company do?

• A) Make the new product and buy the part to earn an extra $2.50 per unit contribution to profit.
• B) Make the new product and buy the part to earn an extra $1.50 per unit contribution to profit.
• C) Continue to make the part to earn an extra $1.50 per unit contribution to profit.
• D) Continue to make the part to earn an extra $5.50 per unit contribution to profit.

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Definitions:

1950

A historical year during the mid-20th century characterized by post-World War II recovery, the beginning of the Cold War, and significant cultural and technological changes.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time, usually measured on a yearly basis.

Eisenhower Administration

The presidency of Dwight D. Eisenhower, the 34th president of the United States, from 1953 to 1961, known for its moderate political stance during the Cold War era.

Federal Government

The national government of a federation, which has specific powers accorded to it by a constitution, distinct from regional governments.