Author Question: Spahr Company produces a part that is used in the manufacture of one of its products. The unit ... (Read 132 times)

pane00 · **on:** Jan 4, 2020

Spahr 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 5,000 units, are as follows:

Direct materials	$2.00
Direct labour	$4.00
Variable manufacturing overhead	$3.00
Fixed manufacturing overhead	$1.00
Total cost	$10.00
The fixed overhead costs are unavoidable.

Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do?
◦ Buy from Erickson and save $1 per unit.
◦ Make the part and save $5 per unit.
◦ Make the part and save $2 per unit.
◦ Make the part and save $1 per unit.

adammoses97 · **Reply #1 on:** Jan 4, 2020

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