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Speck Company Manufactures a Part for Its Production Cycle

Question 24

Multiple Choice

Speck Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
Speck Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:    The fixed factory overhead costs are unavoidable. -Assume that Speck can buy 10,000 units of the part from another producer for $28 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $10 per unit. No additional fixed costs would be incurred. Speck should A)  make the new product and buy the part to earn an extra $6 per unit contribution to profit. B)  make the new product and buy the part to earn an extra $2 per unit contribution to profit. C)  continue to make the part to earn an extra $2 per unit contribution to profit. D)  continue to make the part to earn an extra $6 per unit contribution to profit. The fixed factory overhead costs are unavoidable.
-Assume that Speck can buy 10,000 units of the part from another producer for $28 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $10 per unit. No additional fixed costs would be incurred. Speck should


A) make the new product and buy the part to earn an extra $6 per unit contribution to profit.
B) make the new product and buy the part to earn an extra $2 per unit contribution to profit.
C) continue to make the part to earn an extra $2 per unit contribution to profit.
D) continue to make the part to earn an extra $6 per unit contribution to profit.

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