Supler Corporation Produces a Part Used in the Manufacture of One

question 9

Multiple Choice

Supler Corporation produces a part used in the manufacture of one of its products.The unit product cost is $18, computed as follows: An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each.The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier.Assume that direct labor is an avoidable cost in this decision.Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:

• A)($1)per unit on average
• B)$1 per unit on average
• C)$2 per unit on average
• D)($4)per unit on average

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Definitions:

Market Development

Strategies or actions that seek to expand an existing product into new markets or demographic segments.

Product Development

Product development involves the creation and design of new products or the improvement of existing ones, aiming to meet market demand and enhance competitive advantage.

Diversification

The process of allocating investments among different financial assets or sectors to reduce risk in a portfolio.

SBU

Strategic Business Unit, a fully-functional unit of a business that has its own vision and direction, often with responsibility for its own profitability.