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?

• A) $60,000 decrease
• B) $40,000 decrease
• C) $40,000 increase
• D) $60,000 increase

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Definitions:

Ventral Roots

The efferent motor root of a spinal nerve, transmitting motor information from the spinal cord to the body.

Cervical Region

The area of the spine located in the neck, consisting of seven vertebrae labelled C1 through C7.

Dorsal Roots

Nerve roots that extend from the spinal cord and carry sensory neural signals to the spinal cord from the body.

Thoracic Region

The part of the spine that is located in the chest area, consisting of twelve vertebrae that are connected to the ribs.