Catan Company produces a part that is used in the manufacture of one of its products....
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Catan 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 6,500 units, are as follows: Direct materials $4.20 Direct labor $4.40 $3.20 Variable manufacturing overhead Fixed manufacturing overhead $1.00 Total cost $12.80 The fixed overhead costs are unavoidable. Assume Catan Company can purchase 6,500 units of the part from X- Wing Company for $14.20 each, and the facilities currently used to make the part could be used to manufacture 6,500 units of another product that would have an $11.00 per unit contribution margin. If no additional fixed costs would be incurred, what should Catan Company do? O A. Continue to make the part to earn an extra $1.80 per unit contribution to profit. O B. Make the new product and buy the part to earn an extra $8.60 per unit contribution to profit. OC. Make the new product and buy the part to earn an extra $3.20 per unit contribution to profit. O D. Continue to make the part to earn an extra $2.20 per unit contribution to profit. Catan 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 6,500 units, are as follows: Direct materials $4.20 Direct labor $4.40 $3.20 Variable manufacturing overhead Fixed manufacturing overhead $1.00 Total cost $12.80 The fixed overhead costs are unavoidable. Assume Catan Company can purchase 6,500 units of the part from X- Wing Company for $14.20 each, and the facilities currently used to make the part could be used to manufacture 6,500 units of another product that would have an $11.00 per unit contribution margin. If no additional fixed costs would be incurred, what should Catan Company do? O A. Continue to make the part to earn an extra $1.80 per unit contribution to profit. O B. Make the new product and buy the part to earn an extra $8.60 per unit contribution to profit. OC. Make the new product and buy the part to earn an extra $3.20 per unit contribution to profit. O D. Continue to make the part to earn an extra $2.20 per unit contribution to profit.
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Related Book For
Managing Supply Chain and Operations An Integrative Approach
ISBN: 978-0132832403
1st edition
Authors: Thomas Foster, Scott E. Sampson, Cynthia Wallin, Scott W Webb
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