Sparrow Co

question 166

Multiple Choice

Sparrow Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $8.00 a unit. The unit cost for Sparrow Co. to make the part is $9.00, which includes $0.60 of fixed costs. If 4,000 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) $12,000 decrease
• B) $4,000 increase
• C) $20,000 decrease
• D) $1,600 increase

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Definitions:

Camaraderie

A spirit of friendly good-fellowship and trust among a group of people.

Middle-of-the-road Behaviors

An approach or attitude that is moderate or average, avoiding extremes.

Authority Compliance Behaviors

Actions characterized by a focus on efficiency, control, and achieving tasks while maintaining strict adherence to rules and hierarchy.

Country Club Behaviors

Leadership behaviors that prioritize the needs and well-being of team members, sometimes at the expense of productive task performance.