Foster Industries Manufactures 20,000 Components Per Year

question 148

Multiple Choice

Foster Industries manufactures 20,000 components per year.The manufacturing cost of the components was determined as follows: If the component is not produced by Foster,inspection of products and provision of power costs will only be 10% of the current production costs; moving materials costs and setting up equipment costs will only be 50% of the production costs; and supervision costs will amount to only 40% of the production amount.An outside supplier has offered to sell the component for $25.50.
What is the effect on income if Foster Industries purchases the component from the outside supplier?

• A)$25,000 increase
• B)$45,000 increase
• C)$90,000 decrease
• D)$90,000 increase

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Definitions:

Polysemy

The phenomenon wherein a word, term, or symbol has multiple meanings or interpretations.

Violent And Horrific

Violent and horrific describes actions or events that are extremely brutal, causing fear, shock, or disgust.

Alternative Interpretation

A different or unconventional way of understanding or explaining something, often challenging the more widely accepted views or theories.

Polysemy

The phenomenon where a word or phrase has multiple meanings or interpretations.