Regarding Component Parts

question 354

Multiple Choice

Regarding component parts,

• A) the original equipment market and the aftermarket for component parts are typically separate target markets.
• B) a product originally sold as a component part may become a consumer product when sold in the "aftermarket."
• C) component buyers want dependable suppliers.
• D) they are finished items that must meet specifications.
• E) All of these alternatives are correct.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales over a specified period, such as rent or salaries.

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross profits.

Contribution Margin

The residual amount from sales income post the subtraction of variable costs, signifying its role in offsetting fixed expenses and creating profit.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor expenses.