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.
-Titus Company has offered to sell 5,000 units of the same part to Pett for $18 per unit. Assuming there is no other use for the facilities, Pett should
A) make the part as this would save $3 per unit.
B) buy the part as this would save $3 per unit.
C) buy the part as this would save the company $15,000.
D) make the part as this would save $1 per unit.

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.
-Titus Company has offered to sell 5,000 units of the same part to Pett for $18 per unit. Assuming there is no other use for the facilities, Pett should
A) make the part as this would save $3 per unit. 
B) buy the part as this would save $3 per unit. 
C) buy the part as this would save the company $15,000. 
D) make the part as this would save $1 per unit.

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.
-Titus Company has offered to sell 5,000 units of the same part to Pett for $18 per unit. Assuming there is no other use for the facilities, Pett should
A) make the part as this would save $3 per unit. 
B) buy the part as this would save $3 per unit. 
C) buy the part as this would save the company $15,000. 
D) make the part as this would save $1 per unit.

Pett Company Produces a Part That Is Used in the Manufacture