Use the Information Below to Answer the Following Question(s)

question 54

Multiple Choice

Use the information below to answer the following question(s) :
Spahr 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 5,000 units, are as follows:

-Assume Spahr Company can purchase 5,000 units of the part from Allgood Company for $13.50 each, and the facilities currently used to make the part could be used to manufacture 5,000 units of another product that would have a $6 per unit contribution margin. If no additional fixed costs would be incurred, what should Spahr Company do?

• A) Make the new product and buy the part to earn an extra $2.50 per unit contribution to profit.
• B) Make the new product and buy the part to earn an extra $1.50 per unit contribution to profit.
• C) Continue to make the part to earn an extra $1.50 per unit contribution to profit.
• D) Continue to make the part to earn an extra $5.50 per unit contribution to profit.

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Definitions:

Cape Cod

A geographic cape extending into the Atlantic Ocean from the southeastern corner of mainland Massachusetts, in the northeastern United States.

Vagrancy

A condition of homelessness and joblessness, often criminalized, where individuals wander from place to place without a permanent home or lawful employment.

Self-denial

The act of sacrificing one's own desires or needs, often for ethical or religious reasons.