Brio 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 6,000 units, are as follows:
$$\begin{array} { | l | r | }
\hline \text { Direct materials } & \$ 5 \
\hline \text { Direct labor (variable cost) } & 6 \
\hline \text { Variable manufacturing overhead } & 3 \
\hline \text { Fixed manufacturing overhead } & 4 \
\hline \text { Total cost } & \$ 18 \
\hline
\end{array}$$ Fine Company has offered to sell 6,000 units of the same part to Brio Company for $17.50 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable. What should Brio Company do?

Question

Brio 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 6,000 units, are as follows:
 $$\begin{array} { | l | r | } 
\hline \text { Direct materials } & \$ 5 \
\hline \text { Direct labor (variable cost) } & 6 \
\hline \text { Variable manufacturing overhead } & 3 \
\hline \text { Fixed manufacturing overhead } & 4 \
\hline \text { Total cost } & \$ 18 \
\hline
\end{array}$$ Fine Company has offered to sell 6,000 units of the same part to Brio Company for $17.50 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable. What should Brio Company do?

Quizplus · Accepted Answer

The Answer of Brio 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 6,000 units, are as follows:
 $$\begin{array} { | l | r | } 
\hline \text { Direct materials } & \$ 5 \
\hline \text { Direct labor (variable cost) } & 6 \
\hline \text { Variable manufacturing overhead } & 3 \
\hline \text { Fixed manufacturing overhead } & 4 \
\hline \text { Total cost } & \$ 18 \
\hline
\end{array}$$ Fine Company has offered to sell 6,000 units of the same part to Brio Company for $17.50 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable. What should Brio Company do?

Brio Company Produces a Part That Is Used in the Manufacture