Harvey Automobiles Uses a Standard Part in the Manufacture of Several

question 116

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 60,000 parts is $160,000, which includes fixed costs of $50,000 and variable costs of $110,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs. If Harvey Automobiles makes the part, how much will its operating income be?

• A)$55,000 greater than if the company bought the part
• B)$55,000 less than if the company bought the part
• C)$145,000 greater than if the company bought the part
• D)$145,000 less than if the company bought the part

Identify and analyze the effects of inventory management practices on a company's turnover ratios and overall financial position.

Compare and contrast the financial performance of companies across different sectors using ratio analysis.

Understand the role of operating cash flows in assessing a company’s long-term financial health and risk of default.

Recognize the potential for financial ratios to be distorted by accounting choices and practices, and identify methods for adjusting analysis accordingly.

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Definitions:

Contextual Intelligence

The capacity to recognize the boundaries of what we know and adjust that understanding to suit a setting other than where it originated.

Kinesthetic Intelligence

The ability to use one's body with great precision and agility, effectively integrating movements and gestures.

Multi-Lingual People

Individuals who are able to communicate effectively in multiple languages.

Intellectual Range

A measure of the diversity or scope of an individual's intellectual abilities or interests.