Ecru Company Manufactures 10,000 Components Per Year An Outside Supplier Has Offered to Sell the Component for of the Components

question 33

Multiple Choice

Ecru Company manufactures 10,000 components per year. The manufacturing cost of the components was determined as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 70,000 \\\text { Direct labor } & 115,000 \\\text { Variable manufacturing overhead } & 40,000 \\\text { Fixed manufacturing overhead } & 60,000 \\\text { Total } & \$ 285,000\end{array}$$ An outside supplier has offered to sell the component for $20.
What is the effect on income if Ecru Company purchases the component from the outside supplier?

• A)A $25,000 increase
• B)A $25,000 decrease
• C)A $85,000 decrease
• D)A $85,000 increase

Analyze a firm's liquidity, solvency, and profitability through specific ratios.

Utilize financial ratio analysis to compare company performance.

Recognize the significance of the statement of cash flows.

Apply the Du Pont identity to deconstruct a firm's return on equity.

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Definitions:

Risk For Injury

The potential vulnerability of an individual to accidental injuries based on specific health or environmental conditions.

External Fixation

A surgical treatment method where rods are screwed into bone and exit the body to be attached to an external frame to stabilize broken bones.

Skin Impairment

Damage or disorder affecting the integrity, function, or appearance of skin.

Cast

A protective shell, typically made from plaster or fiberglass, that immobilizes a broken bone to ensure proper healing.