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.
Correct Answer:
Verified
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