Lakers Company Manufactures a Part for Its Production Cycle

question 97

Multiple Choice

Lakers Company manufactures a part for its production cycle.The annual costs per unit for 5,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Spalding Company has offered to sell 5,000 units of the same part to Lakers Company for $14 per unit.The facilities currently used for the part could be used to make 5,000 units annually of a new product that would contribute $5 a unit to fixed expenses.No additional fixed costs would be incurred with the new product.Lakers Company should ________.

• A)make the part to save $1 per unit
• B)make the part to save $3 per unit
• C)make the new product and buy the part to save $1 per unit
• D)make the new product and buy the part to save $3 per unit

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Definitions:

Ethical Problems

Issues or situations that involve conflicts between moral imperatives, requiring individuals to make a moral judgment.

Unethical Business Practices

Business actions that are illegal, immoral, or just outside the bounds of what is considered acceptable behavior in the business realm.

Innocent People

Individuals who are not guilty of a crime or any wrongdoing for which they might be accused.

Critical Thinker

A person who engages in the analysis, synthesis, and evaluation of information gathered from observation, experience, reflection, reasoning, or communication.