Chetek Industries Manufactures 15,000 Components Per Year

question 30

Multiple Choice

Chetek Industries manufactures 15,000 components per year.The manufacturing cost of the components was determined to be as follows: Assume that the fixed manufacturing overhead reflects the cost of Chetek's manufacturing facility.This facility cannot be used for any other purpose.An outside supplier has offered to sell the component to Chetek for $34.If Chetek Industries purchases the component from the outside supplier,the effect on income would be a

• A)$30,000 decrease
• B)$30,000 increase
• C)$90,000 decrease
• D)$90,000 increase

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Definitions:

Administrative Costs

Expenses related to the general operations of a business, including items like salaries of non-sales personnel, rent, utilities, and office supplies.

Employee Leasing

A staffing strategy where companies contract with a third-party to hire and manage their workforce, often to reduce administrative responsibilities.

Professional Employer Organization

A firm that provides a service under which an employer can outsource employee management tasks, such as benefits administration, payroll, and workers' compensation.

Knowledge Worker

An individual whose primary job involves processing and working with information or knowledge, rather than manual labor.