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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:

Direct materials	$4.00
Direct labour	$4.00
Variable manufacturing overhead	$3.00
Fixed manufacturing overhead	$4.00
Total cost	$15.00
The fixed overhead costs are unavoidable.

1. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $13 each, and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year, what should Cruise Company do?
   1. Make the part and save $6.00 per unit.
   2. Make the part and save $2.00 per unit.
   3. Buy the part and save $2.00 per unit.
   4. Buy the part and save $4.00 per unit.

2. Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $13.00 each, and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $7 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?
   1. Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit.
   2. Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit.
   3. Continue to make the part to earn an extra $2.00 per unit contribution to profit.
   4. Continue to make the part to earn an extra $5.00 per unit contribution to profit.

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