Clinton Company Manufactures a Part for Its Production Cycle

question 23

Multiple Choice

Clinton Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Wilson Company has offered to sell 10,000 units of the same part to Clinton Company for $55 per unit.Assuming no other use for the facilities,Clinton Company should ________.

• A)make the part to save $4 per unit
• B)make the part to save $6 per unit
• C)buy the part from Wilson Company to save $4 per unit
• D)buy the part from Wilson Company to save $6 per unit

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.

Dictator Games

A type of experimental game in economics where one player, the "dictator," determines how to split an endowment between themselves and another player, the "recipient."

Ultimatum Games

Represent a scenario in economic experiments where one participant proposes a division of resources, and the other can accept or reject the offer, which, if rejected, leaves both with nothing.