Question

1. Use the information below to answer the following question(s):

   Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:

   Direct materials	$4.00
   Direct labour	$4.00
   Variable manufacturing overhead	$3.00
   Fixed manufacturing overhead	$1.00
   Total cost	$12.00
   The fixed overhead costs are unavoidable.

2. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $17 each, and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year, what should Cruise Company do?
   1. Make the part and save $6.00 per unit.
   2. Make the part and save $2.00 per unit.
   3. Buy the part and save $2.00 per unit.
   4. Buy the part and save $6.00 per unit.

Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $21.00 each, and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $8 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?

1. Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit.
2. Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit.
3. Continue to make the part to earn an extra $2.00 per unit contribution to profit.
4. Continue to make the part to earn an extra $4.00 per unit contribution to profit.

Answer 1