Frederick Co If Frederick Can Buy 5,000 Units from an Outside Supplier

question 87

Multiple Choice

Frederick Co. is thinking about having one of its products manufactured by an outside supplier. Currently, the cost of manufacturing 5,000 units follows:
$$\begin{array} { | l | r | } \hline \text { Direct material } & \$ 62,000 \\\hline \text { Direct labor } & 47,000 \\\hline \text { Variable factory overhead } \ldots \ldots \ldots \ldots \ldots \ldots . & 38,000 \\\hline \text { Factory overhead } & 52,000 \\\hline\end{array}$$ If Frederick can buy 5,000 units from an outside supplier for $130,000, it should:

• A) Make the product because current factory overhead is less than $130,000.
• B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $130,000.
• C) Make the product because factory overhead is a sunk cost.
• D) Buy the product because total fixed and variable manufacturing costs are greater than $130,000.
• E) Buy the product because the total incremental costs of manufacturing are greater than $130,000.

---

Definitions:

Good Grades

High marks or scores awarded for academic performance, reflecting a high level of understanding or mastery in subject areas.

Political Freedom

The rights of individuals in a society to have civil liberties, express opinions, and engage in political participation without undue interference or restriction.

Anterior Cingulate Cortex

A part of the brain located in the frontal lobe, involved in various functions including decision-making, emotion, and impulse control.

Prefrontal Cortex

The front part of the frontal lobe of the brain, associated with decision making, problem-solving, cognitive behavior, and social behavior.