Cruise Company produces a part that is used in the manufacture of one of its products.

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 $4.00 Total cost $15.00 The fixed overhead costs are unavoidable. 6. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $13 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? a. Make the part and save $6.00 per unit. b. Make the part and save $2.00 per unit. c. Buy the part and save $2.00 per unit. d. Buy the part and save $4.00 per unit.

Expert Solution


	Make	Buy
Direct materials per unit	$ 4
Direct labor per unit	$ 4
Variable manufacturing Overhead per unit	$ 3
Opportunity cost per unit	$ 4 ($ 24,000 / 6,000)
Purchase Price		$ 13
Total Price	$ 15	$ 13
Difference in Price = $ 15 (-) $ 13 = $ 2
Option (C ) is Correct Buy the part and save $2.00 per unit.

ekkarill92 answered 2 years ago

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