Tex's Manufacturing Company Can Make 100 Units of a Necessary

question 128

Multiple Choice

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 120,000 \\\text { Direct Labor } & 25,000 \\\text { Variable Overhead } & 45,000 \\\text { Fixed Overhead } & 30,000\end{array}$$ If Tex's Manufacturing Company purchases the component externally, $20,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

• A)$190,000
• B)$200,000
• C)$210,000
• D)$220,000

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Definitions:

Advertising Company

A business specializing in creating, planning, and handling advertising and sometimes other forms of promotion for its clients.

Chemical Company

A business entity that specifically focuses on the manufacturing, research, and sale of chemicals and chemical-based products.

ABC Philosophy

Stands for Activity-Based Costing, a philosophy that allocates overhead and indirect costs to specific activities, leading to more accurate product or service costing.

Inventories

Assets held for sale in the ordinary course of business, or in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services.