Melbourne Corporation Has Traditionally Made a Subcomponent of Its Major

question 34

Multiple Choice

Melbourne Corporation has traditionally made a subcomponent of its major product. Annual production of 30,000 subcomponents results in the following costs:
Melbourne has received an offer from an outside supplier who is willing to provide the 30,000 units of the subcomponent each year at a price of $28 per unit. Melbourne knows that the facilities now being used to manufacture the subcomponent could be rented to another company for $80,000 per year if the subcomponent were purchased from the outside supplier. There would be no effect of this decision on the total fixed manufacturing overhead of the company. Assume that direct labor is a variable cost.
-At what price per unit charged by the outside supplier would Melbourne be indifferent between making or buying the subcomponent?

• A) $29 per unit
• B) $25 per unit
• C) $21 per unit
• D) $24 per unit

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Definitions:

Openness

A trait dimension of personality characterized by a willingness to try new experiences, engage with different viewpoints, and express creativity.

Positively Correlated

When two variables are positively correlated, it means that as the value of one variable increases, the value of the other variable tends to increase as well.

Aggression

Refers to behaviors or actions, whether physical or verbal, intended to harm, intimidate, or exert dominance over others.

Temperature

A physical quantity that expresses hot and cold, measured typically in degrees Celsius, Fahrenheit, or Kelvin.