Answer the Following Questions Using the Information Below:
Stephans Corporation

question 34

Multiple Choice

Answer the following questions using the information below:
Stephans Corporation currently manufactures a subassembly for its main product.The costs per unit are as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 1.00 \\\text { Direct labour } & 10.00 \\\text { Variable overhead } & 5.00 \\\text { Fixed overhead } & \underline { 8.00 } \\\quad \text { Total } & \underline{\$ 24.00} \\\end{array}$$ Bill Company has contacted Stephans with an offer to sell them 5000 of the subassemblies for $22.00 each.Stephans will eliminate $25 000 of fixed overhead if it accepts the proposal.
-Should Stephans make or buy the subassemblies? What is the difference between the two alternatives?

• A)Buy;savings = $50 000
• B)Make;savings = $60 000
• C)Buy;savings = $20 000
• D)Make;savings = $5000

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