Part Z45 Is a Part Used in the Production of Blenders

question 97

Multiple Choice

Part Z45 is a part used in the production of blenders at Andrew Corporation.The following costs and data relate to the production of Part Z45: $$\begin{array} { | l | c c | } \hline \text { Number of parts produced annually } & & 20,000 \\\hline \text { Fixed costs } & \$ & 40,000 \\\hline \text { Variable costs } & \mathbf { \$ } & 66,000 \\\hline \text { Total cost to produce } & \$ & 106,000 \\\hline\end{array}$$ Andrew Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,40% of the fixed costs would be avoided.
- If Andrew Corporation makes the part,how much will its operating income be?

• A)$3,000 greater than if the company bought the part
• B)$24,000 greater than if the company bought the part
• C)$35,000 greater than if the company bought the part
• D)$45,000 less than if the company bought the part

---

Definitions:

Bickering

Petty, peevish arguing, often involving trivial matters.

Adaptive Challenge

A problem or obstacle that is complex, unclear, and requires new learning, innovative problem-solving approaches, and often changes in people's priorities, beliefs, habits, and loyalties.

Espoused Values

The declared set of values and norms that an organization claims to follow and which are supposed to guide the behavior of its members.

Downsize

The reduction of a company's workforce to lower expenses, often resulting in layoffs.