Three Point Company Currently Produces 10,000 Units of a Key

question 1

Multiple Choice

Three Point Company currently produces 10,000 units of a key part at a total cost of $512,000. Variable costs are $300,000. Of the fixed cost, $140,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part for $48 per unit. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $55,000. Alternately, the facilities could be rented out at $63,000. is the opportunity cost to Three Point Company to make the part:

• A) $480,000
• B) $63,000
• C) $55,000
• D) None of these answers is correct.

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Definitions:

Variables

Variables are elements or factors that can change and affect the outcome of scientific experiments or research studies.

Regression Equation

A statistical method used to predict the value of a dependent variable based on one or more independent variables.

Known Score

A score or result that is established or confirmed prior to experimentation or analysis.

Predict

To declare or indicate in advance, especially based on observation, experience, or scientific reasoning.