Scott Corporation produces a part that is used in the production of one of its products. The per-unit costs associated with the annual production of 5,000 units of this part are as follows:
Smith Company has offered to sell 5,000 units of the same part to Scott Corporation for $8 per unit.
Scott should:
A) Buy the part, thereby saving $6.50 per unit.
B) Buy the part, thereby saving $40,000 annually.
C) Buy the part, thereby saving $1.50 per unit.
D) Make the part, thereby saving $3.50 per unit.
E) Make the part, thereby saving $1.50 per unit.

Question

Scott Corporation produces a part that is used in the production of one of its products. The per-unit costs associated with the annual production of 5,000 units of this part are as follows:
 Smith Company has offered to sell 5,000 units of the same part to Scott Corporation for $8 per unit.
Scott should:
A) Buy the part, thereby saving $6.50 per unit. 
B) Buy the part, thereby saving $40,000 annually. 
C) Buy the part, thereby saving $1.50 per unit. 
D) Make the part, thereby saving $3.50 per unit. 
E) Make the part, thereby saving $1.50 per unit.

Quizplus · Accepted Answer

The Answer is E

Scott Corporation Produces a Part That Is Used in the Production