Altertech Inc The Required Volume of Output to Produce the Circuit Boards

question 128

Multiple Choice

Altertech Inc.manufactures a product that contains a circuit board.The company has always purchased this circuit board from a supplier for $32 each.Altertech recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the circuit board instead of buying it.The company prepared the following per unit cost projections of making the circuit board, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 110% of direct labor cost. $$\begin{array} { l l } \text { Direct materials } & \$ 2 \\\text { Direct labor } & { 2 0 } \\\text { Overhead (fixed and } & \underline { 2 2 } \\\text { variable) } & \\\text { Total } & \underline { \$ 44}\end{array}$$ The required volume of output to produce the circuit boards will not require any incremental fixed overhead.Incremental variable overhead cost is $3 per circuit board.What is the effect on income if Altertech decides to make the circuit boards?

• A)Income will decrease by $7 per unit.
• B)Income will increase by $7 per unit.
• C)Income will increase by $12 per unit.
• D)Income will decrease by $12 per unit.
• E)Income will increase by $10 per unit.

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Definitions:

Masters And Johnson

Two American sexologists, William Masters and Virginia Johnson, known for their research into the nature of human sexual response and the diagnosis and treatment of sexual disorders.

Sexual Response

The physiological and emotional reactions of an individual to sexual stimulation, often described in phases such as desire, arousal, orgasm, and resolution.

Leonore Tiefer

A psychologist and sexologist known for her work on human sexuality and critiques of the medicalization of sex.

Natural Act

An action or event that occurs in nature without human intervention, often used in discussions about morality or law.