Question

McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 11,000 units of this part are as​ follows: Direct materials

Direct labor $89,000

Variable factory overhead 128,000

Fixed factory overhead 58,000

Total costs Of the fixed factory overhead​ 140,000

Total costs, $415,000

Of the fixed factory overhead costs, $56000 is avoidable. Conners Company has offered to sell 11000 units of the same part to McMurphy Corporation for $38 per unit. Assuming there is no other use for the​ facilities, Schmidt should​ ________.

A.

buy the​ part, as this would save the company $121,000

B.make the​ part, as this would save

$8

per unit

C.make the​ part, as this would save

$11

per unit

D.buy the​ part, as this would save

$11

per unit

Answer 1