Reference no: EM132625129
Grid Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows
Total costs $420,000
Direct materials $ 90,000
Direct Labor 130,000
Variable factory overhead 60,000
Fixed factory overhead 140,000
Of the fixed factory overhead costs, $60,000 is avoidable.
Problem 1: ABC Company has offered to sell 10,000 units of the same part to Grid Corporation for $36 per unit. Assuming there is no other use for the facilities, Grid should:
Option A- Buy the part, as this would save the company $60,000
Option B- Make the part, as this would save $2 per unit
Option C- Buy the part, as this would save $6 per unit
Option D- Make the part, as this would save $6 per unit
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