Brio Motors Company Produces a Part That Is Used in the Manufacture

question 151

Short Answer

Brio Motors Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
$\begin{array}{ll}\text { Direct materials } & \$ 5 \\\text { Direct labor (variable cost) } & 6 \\\text { Variable manufacturing overhead } & 3 \\\text { Fixed manufacturing overhead } & \underline{4} \\\text { Total cost } & \underline{ \$ 18}\end{array}$
Finn Motors Company has offered to sell 6,000 units of the same part to Brio for $17.50 per unit.Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable,what should Brio do?

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Definitions:

Unauthorized Injection

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Intentional Tort

A category of torts that describes a civil wrong resulting from an intentional act on the part of the tortfeasor (the person who commits the tort).

Contractual Capacity

The legal capability to enter into a binding contract, which typically requires understanding the terms and consequences of the agreement.

Uniform Donor Card

A legal document that states a person’s wish to make a gift upon death of one or more organs for medical research, organ transplants, or placement in a tissue bank.