Shickman Company Makes the Widgets It Uses in One of Its

question 36

Short Answer

Shickman Company makes the widgets it uses in one of its products at a cost of $8 per unit. This cost includes $2 of fixed overhead. The company needs 10,000 of these plugs annually, and Orlando Company has offered to sell them at $5 per unit. If Shickman Company purchases the plugs, the company would: a. Increase profits by $30,000.
B) Decrease profits by $10,000.
C) Increase profits by $10,000.
D) Decrease profits by $30,000.

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Definitions:

Operating Activity

Refers to the primary revenue-generating activities of an organization, such as sales and service provision.

Direct Method

A cash flow statement reporting approach that lists major operating cash receipts and payments, used to show actual cash flows.

Cash Payments

Cash Payments are transactions where monetary value is transferred from one party to another in the form of cash or its equivalent to settle a debt or purchase a good or service.

Positive Cash Effect

The increase in the cash holdings of a business, typically resulting from operational activities, investments, or financing activities that bring in more cash.