Exhibit 22-3 Shasta Company Is Operating at Less Than Full

question 55

Multiple Choice

Exhibit 22-3 Shasta Company is operating at less than full capacity. The production manager is considering using this excess capacity to make a part that he usually buys. The full costs of manufacturing the part are as follows:
Up to now, the company has been buying 2,000 units of the part for a total of $124,000.
Refer to Exhibit 22-3. If Shasta Company decided to make this product, its profit would:

• A) Decrease $28,000
• B) Decrease $4,000
• C) Increase $4,000
• D) Increase $10,000

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Definitions:

Bouquets

A collection or arrangement of flowers.

Short-Run Marginal Cost

The increase in cost a company faces to produce one additional unit of output when some inputs are fixed in the short term.

Production Function

A mathematical model that defines the maximum output of a company from different combinations of input factors.

Cartoonists' Labor

The creative and artistic work performed by cartoonists, including drawing cartoons or comic strips.