Answer the Following Question(s)using the Information Below

question 184

Multiple Choice

Answer the following question(s) using the information below.Schmidt 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:
Of the fixed factory overhead costs, $30,000 is avoidable.
-Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit.Assuming there is no other use for the facilities, Schmidt should

• A)make the part, as this would save $3 per unit.
• B)buy the part, as this would save $3 per unit.
• C)make the part, as this would save $4 per unit.
• D)make the part, as this would save $1 per unit.
• E)buy the part, as this would save $4 per unit.

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Definitions:

FIFO

"First-In, First-Out," an inventory valuation method where the costs of the earliest items purchased or produced are the first to be expensed.

Cost Of Goods Available

The total cost of inventory that a company has available to sell at any given time, calculated by adding the beginning inventory to the cost of goods purchased or manufactured.

FOB Destination

Freight terms indicating that the seller places the goods free on board to the buyer’s place of business, and the seller pays the freight.

Physical Count

An inventory audit practice where a company manually counts all of its inventory at a certain point in time to verify stock levels and values.