Sage Company Is Operating at 90% of Capacity and Is

question 55

Multiple Choice

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20, including fixed costs, and $11, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

• A) $150,000 cost increase
• B) $120,000 cost decrease
• C) $150,000 cost decrease
• D) $120,000 cost increase

---

Definitions:

Preexisting Knowledge

The background information or understanding that an individual possesses before learning new information.

Using An Analogy

An educational method of explaining a new concept by comparing it to a more familiar concept.

Ongoing Conflict

A continuing or persisting conflict without resolution, often involving prolonged struggle or disagreement.

Means-End Analysis

A problem-solving technique that involves breaking down the differences between the current situation and the desired goal into manageable steps.