Cleese Company currently purchases a finished part from Idle Company, but is considering using it excess capacity to make the part. Normal capacity is 20,000 hours, but Cleese is currently running at 17,000 hours. Details about budgeted factory overhead follow: The relevant unit cost Cleese should use to decide whether to make or buy the part is:
A)$31.00
B)$24.50
C)$27.00
D)$26.00

Question

Cleese Company currently purchases a finished part from Idle Company, but is considering using it excess capacity to make the part. Normal capacity is 20,000 hours, but Cleese is currently running at 17,000 hours. Details about budgeted factory overhead follow:  The relevant unit cost Cleese should use to decide whether to make or buy the part is:
A)$31.00 
B)$24.50 
C)$27.00 
D)$26.00

Quizplus · Accepted Answer

11eb16ac_dffe_4195_984d_3ff40276a0e1_TB6154_00 * 2,000 hours / 1,000 units = 2 hours per unit.

Cleese Company Currently Purchases a Finished Part from Idle Company