Ruth Company Produces 1,000 Units of a Necessary Component with the Following

question 52

Multiple Choice

Ruth Company produces 1,000 units of a necessary component with the following costs: Ruth Company could avoid $6,000 in fixed overhead costs if it acquires the components externally. If cost minimization is the major consideration and the company would prefer to buy the components, what is the maximum external price that Ruth Company would accept to acquire the 1,000 units externally?

• A) $58,000
• B) $64,000
• C) $59,000
• D) $62,000

Comprehend the relationship between firm policies and sales, cash-out situations, and inventory levels.

Understand the classification of costs related to inventory management and financial policies.

Grasp the mechanisms of short-term financing and the role of marketable securities.

Calculate the financial outcomes based on accounts receivable and accounts payable periods.

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Definitions:

Variable Expenses

Costs that vary in direct proportion to changes in the level of activity or production volume.

Fixed Expenses

Costs that do not change in total over a wide range of activity levels or over a short period, such as rent or salaries.

Net Income

The total earnings of a company, subtracting total expenses from total revenue.

Break-Even Point

The stage where sales numbers or output equalize with total expenditures, creating a situation where there's no financial loss or gain.