Select one: a. Make the new product and buy the part to earn an extra $1.00 per

Question

Select one:

a. Make the new product and buy the part to earn an extra $1.00 per unit contribution to profit.

b. Make the new product and buy the part to earn an extra $4.00 per unit contribution to profit.

c. Continue to make the part to earn an extra $3.00 per unit contribution to profit.

d. Continue to make the part to earn an extra $8.00 per unit contribution to profit.

2)

Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs.

If Cuyahoga Valley Bicycles buys the part, what is the most Cuyahoga Valley Bicycles can spend per unit so that operating income equals the operating income from making the part?

Select one:

a. $1.33

b. $2.26

c. $4.64

d. $2.33

Explanation / Answer

1) Please provide the entire question. The image is missing

2) (70000+68000*30%)/40000 = 2.26

If Cuyahoga Valley Bicycles buys the part, $2.26 per part is the most Cuyahoga Valley Bicycles can spend per unit so that operating income equals the operating income from making the part.

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