Answer the Following Questions Using the Information Below:
Piels Corporation

question 98

Multiple Choice

Answer the following questions using the information below:
Piels Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 90,000 \\\text { Direct labor } & 130,000 \\\text { Variable factory overhead } & 60,000 \\\text { Fixed factory overhead } & 140,000 \\\quad \text { Total costs } & \$ 420,000\end{array}$ Of the fixed factory overhead costs, $60,000 is avoidable.
-Conners Company has offered to sell 10,000 units of the same part to Piels Corporation for $36 per unit.Assuming there is no other use for the facilities,Schmidt should ________.

• A) make the part, as this would save $6 per unit
• B) buy the part, as this would save $6 per unit
• C) buy the part, as this would save the company $60,000
• D) make the part, as this would save $2 per unit

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