Part S51 Is Used in One of Haberkorn Corporation's Products

question 133

Multiple Choice

Part S51 is used in one of Haberkorn Corporation's products.The company makes 12,000 units of this part each year.The company's Accounting Department reports the following costs of producing the part at this level of activity:
An outside supplier has offered to produce this part and sell it to the company for $37.70 each.If this offer is accepted,the supervisor's salary and all of the variable costs,including direct labor,can be avoided.The special equipment used to make the part was purchased many years ago and has no salvage value or other use.The allocated general overhead represents fixed costs of the entire company.If the outside supplier's offer were accepted,only $17,000 of these allocated general overhead costs would be avoided.
The annual financial advantage (disadvantage) for the company as a result of buying the part from the outside supplier would be:

• A) ($5,800)
• B) ($22,800)
• C) ($149,800)
• D) ($39,800)

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Definitions:

Deductive

A logical process in which a conclusion follows necessarily from the stated premises, moving from general principles to specific instances.

Inductive

A reasoning process that involves making generalizations based on specific observations or evidence.

Quantitative

pertains to data or research that can be measured, represented, or expressed in numerical terms and is often used for statistical analysis.

Androcentricity

The practice of placing a masculine point of view at the center of one's world view, culture, and history, often at the expense of other perspectives.