Sharp Corporation Produces 8,000 Parts Each Year, Which Are Used

question 92

Multiple Choice

Sharp Corporation produces 8,000 parts each year, which are used in the production of one of its products.The unit product cost of a part is $36, computed as follows: The parts can be purchased from an outside supplier for only $28 each.The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth.Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:

• A)$24,000
• B)($24,000)
• C)$56,000
• D)($56,000)

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Definitions:

F.O.B. New York

A contractual term indicating that the seller delivers goods, ready for shipment, to a specific location in New York, with the buyer assuming shipping costs and risk of loss.

Transport

The action or process of moving goods or people from one place to another.

Protective Suits

Specialized clothing designed to protect the wearer from physical harm, hazardous materials, or environmental conditions.

Shipment Contract

A legal agreement specifying that the seller will arrange for goods' transportation to a specific destination, but the risk of loss passes to the buyer once the carrier takes possession.