Tex's Manufacturing Company Can Make 100 Units of a Necessary

question 205

Multiple Choice

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: If Tex's Manufacturing Company purchases the component externally, $15,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

• A) $120,000
• B) $85,000
• C) $115,000
• D) $100,000

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Definitions:

Leisure

Free time not consumed by work or obligations, often used for relaxation, recreation, or other personal activities.

Nonlabor Income

Income received from sources other than employment or the direct exertion of labor, such as dividends, interest, and rental income.

Wage Rate

The amount of money paid to an employee per unit of time or per task performed.

Labor

The human effort, including both physical and mental, used in the production of goods and services.