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Discuss the manufacture of one of its products

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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.

Suri Company has offered to sell 6,000 units of the same part to Cruise Company for $14 per unit. Assuming the company has no other use for its facilities, what should Cruise Company do?

A. Buy from Suri and save $2 per unit.

B. Make the part and save $6 per unit.

C. Make the part and save $3 per unit.

D. Make the part and save $10 per unit.

Reference no: EM131755215

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