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

question 46

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
In deciding whether to make or buy the part, Norran's total relevant costs to make the part are

• A) $360,000.
• B) $240,000.
• C) $420,000.
• D) $405,000.

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Definitions:

Whistleblowing

The act of exposing any kind of information or activity that is deemed illegal, unethical, or not correct within an organization, either private or public, by an insider.

At-Will Employment

An employment arrangement in which an employee can be dismissed by an employer for any reason (that is not illegal) and without warning, just as the employee can leave their job without reason or warning.

Union Organizing

The process of forming or joining a labor union to represent workers in negotiations over wages, hours, and working conditions.

Financial Misconduct

Unethical behavior related to the management of money, such as fraud, embezzlement, or insider trading.