Houser Corporation Manufactures a Part for Its Production Cycle Kingston Company Has Offered to Sell Houser Corporation 5,000 Units

question 80

Multiple Choice

Houser Corporation manufactures a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 32 \\\text { Direct labour } & 40 \\\text { Variable overhead } & 16 \\\text { Fixed overhead } & 32 \\\text { Total } & \$ 120\end{array}$$ Kingston Company has offered to sell Houser Corporation 5,000 units of the part for $112 per unit.If Houser Corporation accepts Kingston Company's offer,total fixed costs will be reduced to $60,000.Which alternative is more desirable,and by what amount is it more desirable? Alternative Amount

• A) Make $20,000
• B) Make $120,000
• C) Buy $40,000
• D) Buy $100,000

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Definitions:

Appendectomy

A surgical procedure to remove the appendix, typically performed to treat appendicitis.

Advantages

Positive aspects or benefits that contribute to an outcome or situation being more favorable.

Chronic Pain

Pain that lasts beyond the usual course for recovery and has no purpose.

Persistent Back Pain

Continuous or recurring pain in the back, often not alleviated by standard medical treatments.