The Lawn Corporation produces a part that is used in the manufacture of one of its products.The costs associated with the production of 10,000 units of this part are as follows:

The managerial accountant reported that $50,000 of the fixed factory overhead was avoidable.
The manager at Rapid Manufacturing Company offered to sell 15,000 units of the same product to the manager at Lawn Corporation at $40 per unit.Assuming the plant is available,should the manager make or buy the product?
A)Make the part to save $8 per unit.
B)Buy the part to save $8 per unit.
C)Make the part to save $20 per unit.
D)Buy the part to save $20 per unit.
E)Make the part to save $25 per unit.

Question

The Lawn Corporation produces a part that is used in the manufacture of one of its products.The costs associated with the production of 10,000 units of this part are as follows:

The managerial accountant reported that $50,000 of the fixed factory overhead was avoidable.
The manager at Rapid Manufacturing Company offered to sell 15,000 units of the same product to the manager at Lawn Corporation at $40 per unit.Assuming the plant is available,should the manager make or buy the product?
A)Make the part to save $8 per unit. 
B)Buy the part to save $8 per unit. 
C)Make the part to save $20 per unit. 
D)Buy the part to save $20 per unit. 
E)Make the part to save $25 per unit.

Quizplus · Accepted Answer

C)Avoidable costs =$300,000 = [($80,000 + $120,000 + $50,000 + $50,000)]
[$40 - ($300,000 / 15,000)] = $40 - $20 = $2

The Lawn Corporation Produces a Part That Is Used in the Manufacture