Garcia Company Produces a Part That Is Used in the Manufacture

Multiple Choice

Garcia Company produces a part that is used in the manufacture of one of its products.The costs associated with the production of 5,000 units of this part are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 108,000 \\\text { Direct labor } & 156,000 \\\text { Variable factory overhead } & 72,000 \\\text { Fixed factory overhead } & 168,000 \\\text { Total costs } & \$ 504,000\end{array}$ Of the fixed factory overhead costs, $72,000 is avoidable.Assume that Garcia Company can buy 5,000 units of the part from another producer for $105.60 each.The facilities currently used to make the part could be rented out to another manufacturer for $72,000 a year.Garcia Company should _____.

A) make the part to save $19.20 per unit
B) make the part to save the company $48,000
C) buy the part to save $14.40 per unit
D) buy the part to save the company $72,000