The Cost System of Charlton Frabricators Indicates That a Product

question 72

Multiple Choice

The cost system of Charlton Frabricators indicates that a product cost $30 to make in house. Of that $30 cost, $7 consists of plant costs that have already been paid for. A supplier proposes to make the same product for $26 but Charlton's plant will have idle time and because of budgetary constraints, will not be retooled to take advantage of that idle time. Should the product be outsourced to the supplier?

• A) No because the relevant cost for making the product is only $23 .
• B) Yes because the Supplier can produce the product for $4.00 less per unit than Charlton can.
• C) Yes because the Supplier can produce the product for $11.00 less per unit than Charlton can.
• D) No because the plant can be utilized for other purposes and either save the company even more money or produce additional revenue.

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Definitions:

Result

The outcome or conclusion of a calculation, experiment, or action, indicating the final effect or findings.

Medication

A substance used in the diagnosis, treatment, mitigation, or prevention of disease.

Sum

The total result obtained when two or more numbers or quantities are added together.