Gordon Corporation Produces 1,000 Units of a Part Per Year

question 48

Multiple Choice

Gordon Corporation produces 1,000 units of a part per year which are used in the assembly of one of its products.The unit cost of producing these parts is:
The part can be purchased from an outside supplier at $20 per unit.If the part is purchased from the outside supplier,two thirds of the total fixed costs incurred in producing the part can be avoided.The annual financial advantage (disadvantage) for the company as a result of buying the part from the outside supplier would be:

• A) $3,000
• B) ($1,000)
• C) $7,000
• D) ($5,000)

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Definitions:

Investor

An individual or entity that commits capital with the expectation of receiving financial returns.

Economic Value

Refers to the value a good or service has in the context of its ability to generate income or utility.

Interest

The cost of borrowing money or the return on investments, usually expressed as a percentage of the amount lent, deposited, or invested.

Interest

A monetary charge for the concession to borrow currency, habitually framed as an annual percentage figure.