Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:
Of the fixed factory overhead costs, $15,000 is avoidable.
-Assume that Pett can buy 5,000 units of the part from another producer for $22 each. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Pett should
A) make the part as that would save $4 per unit.
B) make the part as that would save the company $5,000.
C) buy the part as that would save $3 per unit.
D) buy the part as that would save the company $20,000.

Question

Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:
  Of the fixed factory overhead costs, $15,000 is avoidable.
-Assume that Pett can buy 5,000 units of the part from another producer for $22 each. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Pett should
A) make the part as that would save $4 per unit. 
B) make the part as that would save the company $5,000. 
C) buy the part as that would save $3 per unit. 
D) buy the part as that would save the company $20,000.

Quizplus · Accepted Answer

The Answer of Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:
  Of the fixed factory overhead costs, $15,000 is avoidable.
-Assume that Pett can buy 5,000 units of the part from another producer for $22 each. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Pett should
A) make the part as that would save $4 per unit. 
B) make the part as that would save the company $5,000. 
C) buy the part as that would save $3 per unit. 
D) buy the part as that would save the company $20,000.

Pett Company Produces a Part That Is Used in the Manufacture