(Appendix 11A) Ebbs Products, Inc

question 88

Multiple Choice

(Appendix 11A) Ebbs Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below:
The Automotive Division of Ebbs Products, Inc needs 9,000 special heavy-duty motors per year. The Motor Division's variable cost to manufacture and ship this special motor would be $46 per unit. Because these special motors would requires more manufacturing resources than the standard motor, the Motor Division would have to reduce its production and sales of standard motors to outside customers from 86,000 units per year to 72,500 units per year.
-What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?

• A) $513,000
• B) $342,000
• C) $769,500
• D) $1,093,500

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Definitions:

Fundamental Attribution Error

The tendency to overemphasize personal traits and underemphasize situational factors when explaining others' behavior.

Situational Causes

Factors external to an individual that are viewed as causes for behavior.

Heuristics

Simplified strategies or shortcuts used to make decisions and solve problems more efficiently.

Castro Study

A reference to a classic study in social psychology that examined attitudes and persuasion, often associated with the elaboration likelihood model.