McMurphy Corporation Produces a Part That Is Used in the Manufacture

question 15

Multiple Choice

McMurphy Corporation produces a part that is used in the manufacture of one of its products.The costs associated with the production of 12,000 units of this part are as follows:

Of the fixed factory overhead costs,$55,000 is avoidable.Conners Company has offered to sell 12,000 units of the same part to McMurphy Corporation for $41 per unit.
Assuming there is no other use for the facilities,Schmidt should ________.

• A)make the part,as this would save $16 per unit
• B)buy the part,as this would save $16 per unit
• C)buy the part,as this would save the company $192,000
• D)make the part,as this would save $14 per unit

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Definitions:

Contracts under Seal

Formal contracts which are validated by the seal of the signing party, symbolizing a deliberate intention to undertake obligations.

Soft Wax

A material used primarily for aesthetic purposes, such as enhancing the finish of wood or in hair removal procedures.

Impression

The effect or influence that something or someone produces on the mind or feelings; a perception or interpretation of something.

Negotiable Instruments

Negotiable Instruments are written documents guaranteeing the payment of a specific amount of money to the bearer or named party, such as checks, promissory notes, and drafts.