Carver Company Manufactures a Component Used in the Production of One

question 26

Multiple Choice

Carver Company manufactures a component used in the production of one of its main products. The following cost information is available: $$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 420 \\\hline \text { Direct labor (variable) } & 100 \\\hline \text { Variable manufacturing overhead } & 90 \\\hline \text { Fixed manufacturing overhead } & 30 \\\hline\end{array}$$ A supplier has offered to sell the component to Carver for $650 per unit. If Carver buys the component from the supplier, the released facilities can be used to manufacture a product that would generate a contribution margin of $10,000 annually. Assuming that Carver needs 3000 components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources?

• A) Operating income would decrease by $110,000.
• B) Operating income would increase by $10,000.
• C) Operating income would decrease by $10,000.
• D) Operating income would increase by $120,000.

Identify and calculate the outcomes of random experiments with or without replacement.

Apply the concept of independence and the role of disjoint events in probability theory.

Calculate probabilities in the context of both discrete and continuous random variables.

Recognize and critique fallacies in reasoning about probability and common misconceptions.

---

Definitions:

Average Sale Period

The average time it takes for a company to sell its inventory or products, often used to assess the efficiency of its sales processes and inventory management.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial position, showing assets, liabilities, and shareholders' equity at a specific point in time.

Debt-to-Equity Ratio

A financial ratio indicating the relative proportion of shareholder's equity and debt used to finance a company's assets.

Total Assets

Total assets refer to the sum of all current and non-current assets owned by a business at a given point in time.