Factor Co Can Produce a Unit of Product for the Following

question 44

Multiple Choice

Factor Co. can produce a unit of product for the following costs: $\begin{array}{llr} \text { Direct material} &\$8\\ \text { Direct labor} &24\\ \text { Overhead } &40\\ \text {Total costs per unit } &\$72\end{array}$

An outside supplier offers to provide Factor with all the units it needs at $46 per unit. If Factor buys from the supplier, the company will still incur 60% of its overhead. Factor should choose to:

• A) Buy since the relevant cost to make it is $48.
• B) Buy since the relevant cost to make it is $32.
• C) Buy since the relevant cost to make it is $56.
• D) Make since the relevant cost to make it is $48.
• E) Make since the relevant cost to make it is $32.

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Definitions:

Earnings Per Share

A financial ratio calculated by dividing a company's net income by its number of outstanding shares, indicating the profitability per share.

Earnings Per Share

A financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of the company.

Dividends

A distribution of a portion of a company's earnings to its shareholders, usually determined by the board of directors.