Sutton Inc If Sutton Inc

question 211

Multiple Choice

Sutton Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 130,000 \\\text { Direct Labor } & 103,000 \\\text { Variable Overhead } & 82,000 \\\text { Fixed Overhead } & 62,000\end{array}$$ If Sutton Inc. can purchase the units externally for $300000 by what amount will its total costs change?

• A) An decrease of 67000
• B) An increase of $15000
• C) An increase of $135000
• D) A decrease of $47000

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Definitions:

Bonds

Fixed income securities that represent a loan from an investor to a borrower, typically corporate or governmental, with terms including the interest rate and repayment date.

Privately Placed Bonds

Bonds that are sold directly to a small group of investors instead of being offered to the general public, often to avoid the costs and regulations of a public offering.

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security at a specified price before a certain date.