Answer the Following Questions Using the Information Below:
Nullabor Corporation

question 84

Multiple Choice

Answer the following questions using the information below:
Nullabor 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:
$$\begin{array} { l r } \text { Direct materials } & \$ 45000 \\\text { Direct labour } & 65000 \\\text { Variable factory overhead } & 30000 \\\text { Fixed factory overhead } & \underline { 70000 } \\\quad \text { Total costs } & \underline{\$ 210000 }\\\end{array}$$ Of the fixed factory overhead costs,$30 000 is avoidable.
-Phil Company has offered to sell 10 000 units of the same part to Nullabor Corporation for $18 per unit.Assuming there is no other use for the facilities,Nullabor should:

• A)buy the part,as this would save $3 per unit.
• B)buy the part,as this would save the company $30 000.
• C)make the part,as this would save $3 per unit.
• D)make the part,as this would save $1 per unit.

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Definitions:

Uniform Commercial Code

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize the law of sales and other commercial transactions.

Non-negotiable Instrument

A document or contract that cannot be transferred or assigned from one person to another in a way that the receiver obtains the legal right to it.

Holder in Due Course

A party that has acquired a negotiable instrument in good faith and for consideration, thereby obtaining certain rights free of many defenses available to the original parties.

Checks

Checks are written, dated, and signed instruments that direct a bank to pay a specific amount of money from the writer's account to the person or entity in whose name the check has been issued.