Answer the Following Questions Using the Information Below:
Casper's Engine

question 112

Multiple Choice

Answer the following questions using the information below:
Casper's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1000 units are as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 40000 \\\text { Direct labour } & 10000 \\\text { Variable overhead costs } & 30000 \\\text { Fixed overhead costs } & \underline{ 20000 }\\\quad \text { Total costs } & \underline{ \$ 100000} \\\end{array}$$ It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier.Casper's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit.
-If Casper's Engine Company purchases 1000 TE456 parts from the outside supplier per month,then its monthly operating profit will:

• A)increase by $80 000.
• B)decrease by $85 000.
• C)decrease by $3000.
• D)increase by $2000.

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Definitions:

Performance Management

The process through which managers ensure that employees' activities and outputs contribute to the organization's goals.

Specific Methods

Precise or particular techniques or strategies used to accomplish a task or achieve a goal.

General Principles

Fundamental norms or rules that are widely recognized and upheld in various fields or disciplines.

Culture Shock

Disillusionment and discomfort that occur during the process of adjusting to a new culture.