Use the Following Information to Answer the Questions Below

question 33

Multiple Choice

Use the following information to answer the questions below.
You currently make a part for old equipment at a cost of $20 / unit. The annual fixed cost for this equipment is $50,000. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table) .

-Refer to the instruction above. What are total costs to buy an annual quantity of 40,000 units?

• A) $400,000
• B) $500,000
• C) $800,000
• D) $850,000

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Definitions:

Departmental Contribution

The amount of profit or revenue that a specific department within a company generates, minus its direct costs.

Revenues

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Joint Products

The simultaneous production of two or more products from a single process or material, where the products are of significant value but not necessarily the same value.

Sales Revenue

The total amount of money generated from selling goods or services before any expenses are subtracted.