Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:
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Direct materials
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$4.00
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Direct labor
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$4.00
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Variable manufacturing overhead
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$3.00
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Fixed manufacturing overhead
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$1.00
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Total cost
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$12.00
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The fixed overhead costs are unavoidable.
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Suri Company has offered to sell 6,000 units of the same part to Cruise Company for $14 per unit. Assuming the company has no other use for its facilities, what should Cruise Company do?
A. Buy from Suri and save $2 per unit.
B. Make the part and save $6 per unit.
C. Make the part and save $3 per unit.
D. Make the part and save $10 per unit.