Buddy Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Avoidable

question 46

Multiple Choice

Buddy Company manufactures a part for its production cycle.The costs per unit for 5,000 units of the part are as follows:
$\begin{array}{ll}&\text { Per Unit }\\\text { Direct materials } & \$ 3.00 \\\text { Direct labor } & 5.00 \\\text { Variable factory overhead } & 4.00 \\\text { Fixed factory overhead } & \underline{4.00} \\\text { Total costs } & \$ 16.00\end{array}$
The fixed factory overhead costs are avoidable.Spalding Company has offered to sell 5,000 units of the same part to Buddy Company for $15 per unit.Assuming no other use for the facilities,Buddy Company should ________.

• A) make the part to save $5,000
• B) make the part to save $15,000
• C) buy the part from Spalding Company to save $5,000
• D) buy the part from Spalding Company to save $15,000

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