Anderson Company Uses 10,000 Units of a Part in Its

question 133

Multiple Choice

Anderson Company uses 10,000 units of a part in its production process.The costs to make a part are: direct material,$12; direct labor,$25; variable overhead,$13; and applied fixed overhead,$30.Anderson has received a quote of $55 from a potential supplier for this part.If Anderson buys the part,70 percent of the applied fixed overhead would continue.Anderson Company would be better off by

• A)$50,000 to manufacture the part.
• B)$150,000 to buy the part.
• C)$40,000 to buy the part.
• D)$160,000 to manufacture the part.

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Definitions:

Domestic Production

The total value of all goods and services produced within a country's borders.

Imports

Goods or services brought into one country from another for sale, often subject to tariffs, quotas, and trade agreements.

International Trade

The exchange of goods and services between countries, involving exports and imports.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified period.