Harvey Automobiles Uses a Standard Part in the Manufacture of Several

question 83

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks.The cost of producing 40,000 parts is $120,000,which includes fixed costs of $60,000 and variable costs of $60,000.By outsourcing the part,the company can avoid 30% of the fixed costs.
If Harvey Automobiles buys the part,what is the most Harvey Automobiles can spend per unit so that operating income equals the operating income from making the part?

• A)$1.30
• B)$1.95
• C)$4.05
• D)$2.33

Distinguish between command-and-control and market-based policies for correcting externalities.

Understand the implications of corrective taxes and subsidies on economic efficiency and government revenue.

Understand the role and impact of patent protection in managing technology spillovers.

Comprehend the concept of externalities and their effect on market equilibrium, including positive externalities.

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Definitions:

Accounting Cycle

The collective process of recording and processing the accounting events of a company, from the initial transaction to the preparation of financial statements.

Analyzing Transactions

The process of examining financial transactions to determine their impact on the financial status of an entity.

Ledger

A detailed financial statement showing all the transactions of a business, used to compile the financial statements.

Unadjusted Trial Balance

A list of all the general ledger accounts and their balances at a specific time before any adjusting entries are made.