Growe Company Manufactures Sewing Machines and Requires 30,000 Units of a Component

question 68

Multiple Choice

Growe Company manufactures sewing machines and requires 30,000 units of a component that is used in the manufacturing process. If Growe buys the part from Zigler Brothers the plant will be idle. Of the fixed, 55% overhead will continue regardless of the decision. The cost to buy the part from Zigler is $46. The unit cost to make the part is: Direct materials $12
Direct labour 20
Variable overhead 12
Average fixed overhead 10
Total $54
Relevant costs to make the part are:

• A)$1,320,000
• B)$1,380,000
• C)$1,620,000
• D)$1,455,000

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Definitions:

Loan

Money that is borrowed, typically from a bank or financial institution, that is expected to be paid back with interest.

Compounded Monthly

The process of adding interest to the principal sum of a loan or deposit on a monthly basis.

Economic Value

The worth of a good or service determined by its ability to generate income or utility.

Compounded Monthly

Involves calculating and adding interest to the principal amount of an investment or loan on a monthly basis.