Preston Industries, Inc

question 82

Multiple Choice

Preston Industries, Inc. currently manufactures part QX100, which is used in several products produced by the company. Monthly production costs for 10,000 units of QX100 are as follows:Accounting has estimated that 20% of the fixed overhead costs currently assigned to QX100 would not be needed if the company chose to purchase the part from an outside supplier. Preston currently has the option of purchasing the part from an outside supplier at $16.00 per unit.
Based solely on a short-run financial analysis, the maximum price that Preston should be willing to pay the outside vendor for each unit of QX100 is:

• A) $10.00
• B) $11.00
• C) $15.00
• D) $15.80
• E) $16.00

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Definitions:

Statement Of Stockholders' Equity

A financial statement showing changes in a company's equity, including net income, dividend payments, and stock issues or repurchases, over a period.

Changes In Retained Earnings

Modifications in the accumulated net income of a company that are not distributed to shareholders as dividends.

Statement Of Cash Flows

A financial report detailing the inflows and outflows of cash within a company during a specific period, indicating its operating, investing, and financing activities.

Multiple-step

An income statement format that separates operational revenues and expenses from non-operational ones, providing a detailed view of financial performance.