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 Labor $4.00
Variable manufacturing overhead $3.00
Fixed manufacturing overhead $1.00
Total Cost $12.00
The fixed overhead costs are unavoidable.
Assume Cruise Company can purchase 6300 units of the part from Suri Company for $14.20 each, and the facilities currently used to make the part could be used to manufacture 6300 units of another product that would have an $13 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?
Answers: 3
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Cruise Company produces a part that is used in the manufacture of one of its products. The unit manu...
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