Exhibit 22-4 Lauria Electronics Has Excess Capacity That Could Be

question 30

Multiple Choice

Exhibit 22-4 Lauria Electronics has excess capacity that could be used to make 2,000 antennas for the cell phones that the company produces. The following cost figures are available:
Lauria can buy the antennas from an outside supplier for $10.50.
Refer to Exhibit 22-4. Given the data above, if Lauria has idle facilities with no alternative use, it should:

• A) Buy the antennas from the outside supplier
• B) Make the antennas
• C) Lauria would be equally well off either buying or making the antennas
• D) The answer cannot be determined

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Definitions:

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement by starting with net income and adjusting for changes in non-cash items and operating capital.

Quality of Earnings

An assessment of the degree to which a company's earnings are derived from sustainable, core business activities.

Productive Assets

Assets that are utilized in the production process to generate revenue, including machinery, buildings, and equipment.

Investing Activities

Financial transactions related to the acquisition or sale of long-term assets and other investments not considered cash equivalents.