Chafford,Inc

question 90

Multiple Choice

Chafford,Inc.currently manufactures 2,000 subcomponents in one of its factories.The unit costs to produce the subcomponents are: Due to a labor strike,Chafford is considering purchasing the subcomponents from an outside supplier for $250 per unit.The union is demanding a 20% increase in pay for direct labor.Fixed overhead is not avoidable.How much could Chafford increase their pay before it would be more advantageous to purchase the subcomponents from the outside supplier?

• A)5%
• B)15%
• C)50%
• D)75%

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Definitions:

Capitalism

An economic system characterized by private or corporate ownership of capital goods, investments dictated by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Marginal Cost

The cost of producing one additional unit of a good or service, which can change depending on the level of production.

Costume Party

A social gathering where participants wear costumes and often engage in themed activities, not a term typically associated with economics.

Black Panther

A member of the Black Panther Party, a revolutionary black nationalist and socialist organization active in the United States from 1966 until 1982.