Lawson Company Produces a Part That Has the Following Costs

question 73

Multiple Choice

Lawson Company produces a part that has the following costs per unit: Crest Corporation can provide the part to Lawson for $19 per unit. Lawson Company has determined that 60 percent of its fixed overhead would continue if it purchased the part. However, if Lawson no longer produces the part, it can rent that portion of the plant facilities for $60,000 per year. Lawson Company currently produces 10,000 parts per year. Which alternative is preferable and by what margin?

• A) Make-$20,000
• B) Make-$50,000
• C) Buy-$10,000
• D) Buy-$40,000

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Definitions:

Duty of Loyalty

A legal obligation of fiduciaries, such as company directors and trustees, to act in the best interest of the entity or person they represent.

Actual Financial Loss

A monetary loss that can be quantified or accurately measured, resulting from specific events like theft or litigation.

Negligent

Describes a failure to exercise the care that a reasonably prudent person would exercise in like circumstances, leading to unintended damage or harm.

Actually Named Third Parties

Specific individuals or entities explicitly mentioned in a legal document or contract, distinguishing them from those not directly named.