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

question 185

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:

Decompression Melting

A process where melting occurs due to a decrease in pressure as rock rises closer to the Earth's surface without a significant increase in temperature.

Subduction

The process by which one tectonic plate moves under another plate and is forced into the mantle.

Decompression Melting

The process by which melting occurs in the mantle due to a decrease in pressure as rocks ascend towards the surface.

Mantle-Derived Magmas

Magma that originates from the Earth's mantle, typically characterized by its composition which can influence the type of volcanic eruption.