Vest Industries Manufactures 40,000 Components Per Year

question 112

Multiple Choice

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $12.75.Fixed cost will remain the same if the component is purchased from an outside supplier.
Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Vest purchases the component from the outside supplier?

• A)$225,000 decrease
• B)$195,000 increase
• C)$165,000 decrease
• D)$135,000 increase

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Definitions:

Distributive Justice

The perceived fairness of the allocation or distribution of resources among individuals or groups.

Operational Justice

A concept concerning fairness and ethical treatment within the procedural aspects of organizational operations.

Procedural Justice

The concept that fair and transparent processes are as important as the outcomes themselves in determining perceptions of fairness among individuals.

Goal-Setting Theory

A framework that suggests the establishing of clear, specific, and challenging goals can significantly influence performance and motivation.