Speck Company Manufactures a Part for Its Production Cycle

question 108

Multiple Choice

Speck Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
The fixed factory overhead costs are unavoidable.
-Assume that Speck can buy 10,000 units of the part from another producer for $30 each. The facilities currently used to make the part could be rented out to another manufacturer for $40,000 a year. Speck should

• A) make the part as that would save $2 per unit.
• B) buy the part as that would save $6 per unit.
• C) buy the part as that would save $2 per unit.
• D) make the part as that would save $6 per unit.

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Definitions:

Aggregate Spending

The total spending in an economy on domestic goods and services, including consumption, investment, government expenditures, and net exports.

Net Exports

Net Exports is the value of a country's total exports minus its total imports, representing the net effect of foreign trade on the economy.

Government Purchases

Expenditures by government entities for goods and services that directly consume economic output.

Real GDP

Refers to the total economic output of a country, adjusted for price changes or inflation, measured in constant prices.