Piper Corp

question 130

Multiple Choice

Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $26, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a

• A)$30,000 cost decrease
• B)$180,000 cost increase
• C)$30,000 cost increase
• D)$180,000 cost decrease

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Definitions:

Homemade Leverage

The use of personal borrowing to adjust the overall level of financial leverage that an individual utilizes in their investments.

Capital Structure

Describes the mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, used to finance its overall operations and growth.