Use the Following Information for Questions
Ortiz Co If Ortiz Buys the Part from an Outside Supplier, $40,000

question 32

Multiple Choice

Use the following information for questions
Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: $$\begin{array} { l r } \text { Direct materials } & \$ 55,000 \\\text { Direct labor } & 160,000 \\\text { Variable overhead } & 75,000 \\\text { Fixed overhead } & 175,000\end{array}$$ If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable.
-If the outside supplier offers a unit price of $68, net income will increase (decrease) by

• A) $(10,000).
• B) $125,000.
• C) $(50,000).
• D) $85,000.

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Definitions:

Formalization

The process of standardizing policies and procedures within an organization.

Hostile Environment

A work or social environment that is intimidating, unfriendly, or offensive, often due to harassment or discriminatory practices.

Organic Structure

A flexible, decentralized organizational structure with low levels of formalization.

Informal Communication

The exchange of information through non-official channels, often based on personal relationships rather than organizational structure.