01 49 39 This Test: 37 pls Lasso annualy. The annual costs to product Part B89 a

Question

01 49 39 This Test: 37 pls Lasso annualy. The annual costs to product Part B89 at the level of 14,000 units include ect materials Direct labor Variable manufacturing overhead Fixed Total cost $3.50 $8 20 $4.20 $3.50 $19.40 has offered to sell 14,000 units of Part B89 to Lasso Corporation for $20.10 per unit. What should Lasso Corporation do? 0 A. Make the part and save $12 40 per unit O B. Make the part and save $420 per unit O C. Make the part and save $8.90 per unit O D. Buy from Nadal Parts Company and lose $0.70 per unit 804 PM 9 8 5 6 3 aLl

Explanation / Answer

Solution :

Total saving on making over buying = $20.10 - $15.90 = $4.20 per unit

Therefore company should make the part and save $4.20 per unit. Hence option B is correct.

Computation of relevant cost to make or buy - lasso corporation Particulars Making Part B89 Buying Part B89 Costs: Purchase Price $0.00 $20.10 Direct material $3.50 $0.00 Direct Labor $8.20 $0.00 Variable manufacturing overhead $4.20 $0.00 Total Cost $15.90 $20.10

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