Match Company Produces a Part That Is Used in the Manufacture

question 89

Multiple Choice

Match Company produces a part that is used in the manufacture of one of its products.The costs associated with the production of 5,000 units of this part are as follows: Of the fixed factory overhead costs,$72,000 are avoidable.Today Company has offered to sell 5,000 units of the same part to Match for $86.40 per unit.Assuming there is no other use for the facilities,Match Company should ________.

• A)make the part to save $24,000
• B)make the part to save $72,000
• C)buy the part to save $24,000
• D)buy the part to save $72,000

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Definitions:

Callable

Refers to a type of financial security, such as a bond, that can be redeemed or "called" by the issuer before its maturity date, usually at a specified call price.

Yield To Call

The rate of return anticipated on a bond if it is held until the call date, considering both the interest payments received and the capital gain or loss upon redemption.

Call Price

The price at which a callable bond or preferred stock can be repurchased by the issuer before its maturity date.

Coupon Bond

A type of bond that offers interest payments through periodic coupon payments to the bondholder and returns the principal at maturity.