Fin Company Fabricates Inexpensive Automobiles for Sale to 3^rd World

question 130

Multiple Choice

Fin Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: A factory in Indonesia has offered to supply Fin Company with ready-made units for a price of $15 each. Assume that Fin's fixed costs are unavoidable, and that Fin will not be able to use the excess capacity in any profitable manner. What will be the impact on Fin's monthly operating income, if Fin decides to outsource?

• A)It will go up by $3,000.
• B)It will go down by $20,000.
• C)It will go up by $20,000.
• D)It will go down by $3,000.

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Definitions:

Communication Structure

The organized way in which information flows within an organization or project team, including the methods and channels of communication.

Organization

An entity, such as a company, institution, or association, composed of multiple people and structured systematically to meet a common goal.

Parent Organization

A larger, overarching entity that owns or controls smaller entities or subsidiaries.

Probability Density Function

A mathematical function that specifies the probability of a continuous random variable falling within a particular range of values.