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

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Definitions:

Flexibility

is the quality of being able to adapt to new, different, or changing requirements, in both personal and professional contexts.

Grid Computing

A distributed architecture of large numbers of computers connected to solve a complex problem.

Scalability

The ability of a system, network, or process to handle a growing amount of work, or its potential to be enlarged to accommodate that growth.

Remote Job Entry

A procedure that allows users or programs to submit jobs to a computer system from a remote location.