Bell's Shop Can Make 1,000 Units of a Necessary Component

question 152

Multiple Choice

Bell's Shop can make 1,000 units of a necessary component with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 24,000 \\\text { Direct Labor } & 6,000 \\\text { Variable Overhead } & 3,000 \\\text { Fixed Overhead } & ?\end{array}$$ The company can purchase the 1,000 units externally for $39,000.The unavoidable fixed costs are $2,000 if the units are purchased externally.An analysis shows that at this external price, the company is indifferent between making or buying the part.What are the fixed overhead costs of making the component?

• A)$8,000
• B)$6,000
• C)$4,000
• D)Cannot be determined.

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Definitions:

Level of Significance

In statistical hypothesis testing, it is the criterion used for deciding whether to reject the null hypothesis, often represented by alpha (α) and set before the study.

Significant Results

Findings in research that are unlikely to have occurred by chance alone, indicating a notable difference or effect that is statistically significant.

Obtained Value

The measured or calculated value resulting from an experiment or study.

Critical Value

A point on the scale of the test statistic beyond which we reject the null hypothesis; it defines the cutoff point for significance.