The SP Corporation Makes 40,000 Motors to Be Used in the Production

question 162

Multiple Choice

The SP Corporation makes 40,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $18. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:

• A) $276,000
• B) $86,000
• C) ($92,000)
• D) $178,000

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Definitions:

Gpresult

A command that displays Group Policy settings. A Group Policy determines how a computer is configured for both system and user (or a group of users) settings.

Xcopy

A command that transfers files from one place to another in the command prompt environment.

Self-replicating

The ability of an entity, especially viruses or certain programs, to produce copies of itself autonomously.

Worm

A virus program that replicates from one drive to another. The most common worm virus today is an email message that, when opened, sends the virus to every address in the user’s address book.