Christian Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable

question 63

Multiple Choice

Christian Company manufactures a part for its production cycle.The annual costs per unit for 5,000 units of the part are as follows:
$\begin{array}{ll}&\text { Per Unit }\\\text { Direct materials } & \$ 3.00 \\\text { Direct labor } & 5.00 \\\text { Variable factory overhead } & 4.00 \\\text { Fixed factory overhead } & \underline{2.00} \\\text { Total costs } & \$ 14.00\end{array}$
The fixed factory overhead costs are unavoidable.Another company has offered to sell 5,000 units of the same part to Christian Company for $15 per unit.The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year.Christian Company should ________.

• A) make the part to save $5,000
• B) make the part to save $15,000
• C) buy the part and rent facilities to save $5,000
• D) buy the part and rent facilities to save $15,000

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