Cruise Company Produces a Part That Is Used in the Manufacture

question 104

Multiple Choice

Cruise Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:

Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $14.00 each,and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $8 per unit contribution margin.If no additional fixed costs would be incurred,what should Cruise Company do?

• A)Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit.
• B)Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit.
• C)Continue to make the part to earn an extra $2.00 per unit contribution to profit.
• D)Continue to make the part to earn an extra $4.00 per unit contribution to profit.

Understand the importance of property rights in a market economy.

Recognize the impact of government policies on market economies.

Explain the relationship between prices and economic activity.

Understand the factors contributing to inflation and its effects on an economy.

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Definitions:

Self-Serving Bias

The common tendency to attribute our successes to personal characteristics and our failures to factors beyond our control.

Fundamental Attribution Error

The tendency to attribute others' behavior to their character or disposition rather than to external factors.

Just-World Hypothesis

The belief that people get what they deserve and deserve what they get, which often underlies the assumption that the world is fair and justice is served.

Validity Effect

The tendency to believe that information is correct or valid simply because it has been repeated multiple times.