The Cost to Produce Part a Was $10 Per Unit

question 49

Multiple Choice

The cost to produce Part A was $10 per unit in 2017 and in 2018 it has increased to $11 per unit.In 2018,Supplier XYZ has offered to supply Part A for $9 per unit.For the make-or-buy decision:

• A)incremental costs are $1 per unit.
• B)incremental revenues are $2 per unit.
• C)net relevant costs are $1 per unit.
• D)differential costs are $2 per unit.

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Definitions:

Unrealized Gain

Profit that has been achieved on paper due to an increase in the value of an investment but has not yet been realized through a sale.

Trading Investment

A trading investment refers to securities bought and held primarily for selling them in the near term with the aim of profiting from short-term price fluctuations.

Realized Gain

A profit that results from selling an asset at a higher price than its purchase cost, officially recognized when the asset is sold.

Fair Value

The estimated price at which an asset could be bought or sold in a current transaction between willing parties, other than in a liquidation.