The Norran Company Needs 15,000 Units of a Certain Part

question 46

Multiple Choice

The Norran Company needs 15,000 units of a certain part to use in its production cycle. If Norran buys the part from Waterloo Company instead of making it, Norran could not use the released facilities in another activity; thus, all of the fixed overhead applied will continue regardless of what decision is made. Accounting records provide the following data: Cost to Norran to make the part:
Direct materials, $3
Direct labor, $12
Variable overhead, $13
Fixed overhead applied, $8
Cost to buy the part from the Waterloo Company, $27
In deciding whether to make or buy the part, Norran's total relevant costs to make the part are

• A) $360,000.
• B) $240,000.
• C) $420,000.
• D) $405,000.

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Definitions:

Student Loan Disbursement

The process by which loan funds are made available to a student by the lending institution, often sent directly to the educational institution to cover tuition and fees.

Income

The money received, especially on a regular basis, for work or through investments.

Tuition

The fee charged for instruction, especially at a formal institution of learning.

Expense

The cost or expenditure incurred in the transaction of an activity or the procurement of goods and services.