Use the information below to answer the following question(s) :
Spahr 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 5,000 units, are as follows:

-Assume Spahr Company can purchase 5,000 units of the part from Allgood Company for $13.50 each, and the facilities currently used to make the part could be used to manufacture 5,000 units of another product that would have a $6 per unit contribution margin. If no additional fixed costs would be incurred, what should Spahr Company do?
A) Make the new product and buy the part to earn an extra $2.50 per unit contribution to profit.
B) Make the new product and buy the part to earn an extra $1.50 per unit contribution to profit.
C) Continue to make the part to earn an extra $1.50 per unit contribution to profit.
D) Continue to make the part to earn an extra $5.50 per unit contribution to profit.
Correct Answer:
Verified
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