Johnson Company Manufactures a Part for Its Production Cycle

question 145

Multiple Choice

Johnson Company manufactures a part for its production cycle.The annual costs per unit for 10,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Spalding Company has offered to sell 10,000 units of the same part to Johnson Company for $60 per unit.The facilities currently used to make the part could be rented out to another manufacturer for $100,000 per year.Johnson Company should ________.

• A)make the part to save $1 per unit
• B)make the part to save $2.50 per unit
• C)buy the part to save $1 per unit
• D)buy the part to save $2.50 per unit

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Definitions:

Standard Error

A measure of the statistical accuracy of an estimate, indicating the variability of sampling distributions.

Contrast

The difference in luminance or color that makes an object distinguishable from other objects and the background.

Disc Brakes

A type of brake that slows a vehicle by pressing brake pads against a disc attached to the wheel.

Common Population

The total set of individuals or items that share one or more characteristics from which data can be gathered and analyzed.