Piper Corp

question 136

Multiple Choice

Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36 including fixed costs and $26 excluding fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

• A) $30,000 cost decrease
• B) $180,000 cost increase
• C) $30,000 cost increase
• D) $180,000 cost decrease

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Definitions:

Merchandise Inventories

Goods and products that a company holds for the purpose of resale to customers.

Sales Budget

An estimate of the expected sales revenue a company aims to achieve in a specific period, including both volume and value of sales.

Required Production

The quantity of goods that must be produced during a certain period to meet customer demand and inventory policies.

Budgeted Sales

An estimated amount of sales in units or dollars that a company plans to achieve during a certain period, often used for planning and operational purposes.