Fornelli, Inc -If Fornelli, Inc

question 5

Multiple Choice

Fornelli, Inc.can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$
-If Fornelli, Inc.can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

• A)Make and save $500
• B)Buy and save $500
• C)Make and save $2,500
• D)Buy and save $6,500

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Definitions:

Parallel Circuit

An electrical circuit in which components are connected across common points or junctions, providing multiple paths for current to flow.

Apparent Power

The total power in an AC circuit, equal to the product of the root mean square voltage and current, measured in volt-amperes (VA).

Parallel Circuit

An electrical circuit in which the same voltage is applied across all components, with each component directly connected to the voltage source.

Inductive Reactance

The opposition that inductance presents to alternating current, depending on the frequency of the current and the inductance value, measured in ohms.