Wishnell Toys Can Make 5,000 Toy Robots with the Following

question 39

Multiple Choice

Wishnell Toys can make 5,000 toy robots with the following costs: $$\begin{array} { l c } \text { Direct Materials } & \$ 74,000 \\\text { Direct Labour } & 30,000 \\\text { Variable Overhead } & 23,000 \\\text { Fixed Overhead } & 15,000\end{array}$$ The company can purchase the 5,000 robots externally for $145,000.The avoidable fixed costs are $15,000 if the units are purchased externally.What is the cost savings if the company makes the robots?

• A)$18,000
• B)$15,000
• C)$5,000
• D)$3,000

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Definitions:

Decrease in Demand

This occurs when the quantity of a good or service that consumers are willing and able to purchase at a specific price level declines, due to factors such as changes in preference or income.

Long-Run Equilibrium

A state in which supply and demand are balanced, and all economic variables are at their natural levels, not influenced by external short-term fluctuations.

Firms in the Industry

Businesses or companies that produce goods or provide services within a specific sector of the economy.

Output

The quantity of goods or services produced by a firm, industry, or economic system.