Elly Industries Is a Multi-Product Company That Currently Manufactures 30,000

question 172

Multiple Choice

Elly Industries is a multi-product company that currently manufactures 30,000 units of part MR24 each month for use in production of its products. The facilities now being used to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 35,000 units per month. If Elly were to buy part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40% of their present amount. The variable production costs of Part MR24 are $11 per unit.
-If Elly industries is able to obtain part MR24 from an outside supplier at a purchase price of $10 per unit,the monthly financial advantage (disadvantage) of buying the part rather than making it would be:

• A) $30,000
• B) $180,000
• C) $90,000
• D) $120,000

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