Barker 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, $60,000 is avoidable.
-Blass Company has offered to sell 5,000 units of the same part to Barker for $72 per unit. Assuming there is no other use for the facilities, Barker should
A) make the part as this would save $12 per unit.
B) buy the part as this would save $12 per unit.
C) buy the part as this would save the company $60,000.
D) make the part as this would save $4 per unit.

Question

Barker 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, $60,000 is avoidable.
-Blass Company has offered to sell 5,000 units of the same part to Barker for $72 per unit. Assuming there is no other use for the facilities, Barker should
A) make the part as this would save $12 per unit. 
B) buy the part as this would save $12 per unit. 
C) buy the part as this would save the company $60,000. 
D) make the part as this would save $4 per unit.

Quizplus · Accepted Answer

The Answer of Barker 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, $60,000 is avoidable.
-Blass Company has offered to sell 5,000 units of the same part to Barker for $72 per unit. Assuming there is no other use for the facilities, Barker should
A) make the part as this would save $12 per unit. 
B) buy the part as this would save $12 per unit. 
C) buy the part as this would save the company $60,000. 
D) make the part as this would save $4 per unit.

Barker Company Produces a Part That Is Used in the Manufacture