A Firm at Present Manufacturers All the Components That Go $\quad$

question 17

Multiple Choice

A firm at present manufacturers all the components that go to make up its finished products. A salesman from a component supplier has just offered to provide the firm’s requirements for two components, the JC 100 at £7.75 each and the JC 200 at £2 each. If the firm buys in the components the capacity utilised at present would be unused. The firm currently manufactures 50 000 units of each component and the current costs of production are as follows:

What is the extra cost (EC) or saving (S) per unit if the company decides to buy in the component:

JC 100 (£) $\quad$ JC 200 (£)

• A) 2.25 (E
• C) \( \quad \)0.25 (
• B) 1.25 (
• S) \( \quad \)2.00 (E
• C) 1.75 (E
• C) \( \quad \)1.25 (
• D) 2.00 (
• S) \( \quad \)1.00 (

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Definitions:

Treasury Stock

Treasury stock consists of shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Dividend Yield

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price, providing insight into the income generated from an investment.

Cash Dividends

Payments made by a corporation to its shareholders, typically from profits, in the form of cash.

Treasury Stock

Shares that were issued and later reacquired by the issuing company, reducing shareholders' equity and outstanding shares.