Johnson Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable

question 77

Multiple Choice

Johnson Company manufactures a part for its production cycle.The costs per unit for 10,000 units of this part are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 20 \\\text { Directlabor } & 15 \\\text { Variable factory overhead } & 16 \\\text { Fixed factory overhead } & 10 \\\text { Total costs } & \$ 61\end{array}$ The fixed factory overhead costs are unavoidable.Assume that Johnson Company can buy 10,000 units of the part from another producer for $60 each.The facilities currently used to make the part could be rented out to another manufacturer for $100,000 a year.Johnson Company should _____.

• A)buy the part to save $2.50 per unit
• B)buy the part to save $1 per unit
• C)make the part to save $2.50 per unit
• D)make the part to save $1 per unit

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Definitions:

Reward

A benefit or positive reinforcement given for desirable behavior or performance, often used to encourage that behavior to happen again.

Behavioural Perspective

An approach in psychology focusing on observable behaviors and the ways in which environment conditions affect them.

Environmental Stimuli

External factors or changes in the environment that influence behavior or responses in organisms.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome, often reflecting a concern about future events.