Pitkin Company Produces a Part Used in the Manufacture of One

question 142

Multiple Choice

Pitkin Company produces a part used in the manufacture of one of its products.The unit product cost of the part is $33,computed as follows: An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each.The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier.Assume that direct labour is an avoidable cost in this decision.Based on these data,the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be:

• A) $1 disadvantage.
• B) $1 advantage.
• C) $3 advantage.
• D) $4 disadvantage.

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Definitions:

SWOT Analysis

A strategic planning tool used to identify Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning.

Obsolete Technologies

Outdated or replaced technologies that are no longer in use or have been superseded by newer versions.

Heavy-Metal Industry

relates to sectors involved in the production and processing of metals such as steel and aluminum, known for their intensive use of heavy machinery and environmental impact.

Core Competency

A special strength that gives an organization a competitive advantage.