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

question 55

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
What should Norran's decision be, and what is the total cost savings that would result?

• A) Buy, $90,000
• B) Buy, $15,000
• C) Make, $90,000
• D) Make, $15,000

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Definitions:

Oophorotomy

A surgical incision into an ovary.

Hysterosalpingography

A radiographic procedure to examine the uterus and fallopian tubes using a contrast medium to assess their shape and patency.

Laparoscopy

A minimally invasive surgical procedure that uses a laparoscope to view and operate on the organs inside the abdomen or pelvic area.

Culdoscopy

A diagnostic procedure that examines the female pelvic organs by inserting an endoscope through the vaginal wall.