Fornelli, Inc If Fornelli, Inc

question 3

Multiple Choice

Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$ If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

• A)Make and save $500
• B)Buy and save $500
• C)Make and save $2,500
• D)Buy and save $6,500

---

Definitions:

Expected Dividend

The forecasted payment of profits by a corporation to its shareholders, usually announced by the company's board of directors.

Dividend Growth Rate

The rate of growth in a company's dividend payments, expressed as an annual percentage.

Expected Return

The anticipated profit or loss from an investment over a certain period of time, often expressed as a percentage.

Paid Dividends

Cash or other assets distributed to shareholders out of a corporation's earnings.