Scenario 12.1 You Currently Make a Part on Old Equipment at a at a Cost

question 44

Multiple Choice

Scenario 12.1
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit. 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. The following table summarizes the details of this make versus buy decision.

-Use Scenario 12.1 to answer the question. For what range of output would you prefer to make?

• A) 40,001 or more units per year
• B) 35,001 - 40,000 units per year
• C) 30,001 to 35,000 units per year
• D) 0 - 30,000 units per year

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Definitions:

Investment Interest Expense

The amount of interest paid on debt incurred for investments, allowing taxpayers to deduct it under certain conditions.

Gross Investment Income

The total income generated from various investment sources before any deductions or taxes are applied.

Medical Expense Deduction

A tax deduction allowed for unreimbursed medical expenses that exceed a certain percentage of the taxpayer's adjusted gross income.

Dependent

Dependent is a person, typically a child or elderly family member, whose support and maintenance are provided by another, qualifying the supporting individual for certain tax benefits.