Garcia Company produces a part that is used in the manufacture of one of its products.The annual costs associated with the production of 5,000 units of this part are as follows: Of the fixed factory overhead costs,$72,000 are avoidable.Another company has offered to sell 5,000 units of the same part to Garcia for $105.60 per unit.The facilities currently used to make the part can be rented out to another manufacturer for $72,000 per year.What should Garcia Company do?
A)Make the part to save $48,000.
B)Make the part to save $96,000.
C)Buy the part to save $24,000.
D)Buy the part to save $72,000.

Question

Garcia Company produces a part that is used in the manufacture of one of its products.The annual costs associated with the production of 5,000 units of this part are as follows:  Of the fixed factory overhead costs,$72,000 are avoidable.Another company has offered to sell 5,000 units of the same part to Garcia for $105.60 per unit.The facilities currently used to make the part can be rented out to another manufacturer for $72,000 per year.What should Garcia Company do?
A)Make the part to save $48,000. 
B)Make the part to save $96,000. 
C)Buy the part to save $24,000. 
D)Buy the part to save $72,000.

Quizplus · Accepted Answer

The Answer of Garcia Company produces a part that is used in the manufacture of one of its products.The annual costs associated with the production of 5,000 units of this part are as follows:  Of the fixed factory overhead costs,$72,000 are avoidable.Another company has offered to sell 5,000 units of the same part to Garcia for $105.60 per unit.The facilities currently used to make the part can be rented out to another manufacturer for $72,000 per year.What should Garcia Company do?
A)Make the part to save $48,000. 
B)Make the part to save $96,000. 
C)Buy the part to save $24,000. 
D)Buy the part to save $72,000.

Garcia Company Produces a Part That Is Used in the Manufacture