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:

Inconsistency

Lack of consistency, uniformity, or agreement.

People

In marketing, refers to the individuals or groups who are the focus of marketing efforts, including customers, employees, and other stakeholders.

Automations

The technology by which a process or procedure is performed with minimal human assistance, often improving efficiency and accuracy.

Equipment-based Service

A type of service that heavily relies on physical devices or machines to deliver value to customers.