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

question 95

Multiple Choice

Krakowski Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows:
$\begin{array}{ll}&\text { Per Unit }\\\text { Direct materials } & \$ 20.00 \\\text { Direct labor } & 15.00 \\\text { Variable factory overhead } & 16.00 \\\text { Fixed factory overhead } & \underline{10.00} \\\text { Total costs } & \$ 61.00\end{array}$
The fixed factory overhead costs are unavoidable.Winters Company has offered to sell 10,000 units of the same part to Krakowski Company for $55 per unit.Assuming no other use for the facilities,Krakowski Company should ________.

• A) make the part to save $40,000
• B) make the part to save $60,000
• C) buy the part from Winters Company to save $40,000
• D) buy the part from Winters Company to save $60,000

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Definitions:

Return on Investments

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.

Competitors

Other businesses or products that offer similar solutions or target the same customers within a market.

Industry Averages

Statistical measures that represent the typical performance or behavior of companies within a particular industry, often used for benchmarking purposes.

Promotion-to-Sales Ratio

A metric used to measure the effectiveness of a promotional campaign by comparing the cost of the promotion to the generated sales.