Question

McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 12,000 units of this part are as follows: Direct materials $86,000 Direct labor 126,000 Variable factory overhead 58,000 Fixed factory overhead 138,000 Total costs $408,000 Of the fixed factory overhead costs, $55,000 is avoidable. Conners Company has offered to sell 12,000 units of the same part to McMurphy Corporation for $41 per unit. Assuming there is no other use for the facilities, McMurphy should ________. A) make the part, as this would save $16 per unit B) buy the part, as this would save $16 per unit C) buy the part, as this would save the company $192,000 D) make the part, as this would save $14 per unit If McMurphy had the opportunity to use the facility to make a different product that would have a total contribution margin of $168,000, McMurphy should:

Answer 1

Answer:

C) buy the part, as this would save the company $192,000

Explanation:

Assuming there is no other use for the facilities, McMurphy should _buy the part, as this would save the company $192,000_______.