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Frank CoIs Currently Operating at 80% of Capacity and Is Currently

question 92

Multiple Choice

Frank Co.is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit.The unit cost for Frank Co.to make the part is $30, which includes $3 of fixed costs.If 20,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it?

Evaluate a company's ability to meet its short-term and long-term obligations.

Understand and correctly identify components and calculations involved in key financial ratios, including solvency, profitability, and liquidity ratios.

Recognize the significance of financial analysis tools, including horizontal and vertical analysis, for evaluating a company's performance over time and in comparison to industry standards.

Grasp the implications of changes in financial ratios and what they indicate about a company's financial health and operational efficiency.

Definitions:

Trade

The exchange of goods, services, or both between individuals, businesses, or countries.

Corn

A cereal plant that bears large grains, or kernels, set in rows on a cob; an important crop for food, animal feed, and biofuel.

Acquired Comparative Advantage

The ability gained through strategic development and investment in industries or areas where a country or firm did not previously have a natural comparative advantage.

German Beer

Refers to beer produced in Germany, known for its quality and variety, and regulated by the Reinheitsgebot, or beer purity law.