A Manufacturing Company Needs to Know Whether to Make In-House

question 49

Multiple Choice

A manufacturing company needs to know whether to make in-house or buy a roller gear assembly for its production of a new fax machine. The company expects to produce 9,000 units per year. The following estimates have been made:
$\begin{array}{|l|c|c|}\hline & \text { Make } & \text { Buy } \\\hline \text { Fixed cost per year } & \$ 8,000 & \$ 0 \\\hline \text { Variable cost per part } & \$ 5.45 & \$ 6.93 \\\hline\end{array}$
-The annual cost to make the roller gear assembly in-house is _____.

• A) less than or equal to $30,000
• B) more than $30,000 but less than or equal to $40,000
• C) more than $40,000 but less than or equal to $50,000
• D) more than $50,000 but less than or equal to $60,000

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Definitions:

Tenant-Days

A metric used in real estate or lodging industries, calculated by multiplying the number of tenants by the number of days they occupied a space.

Planning Budget

A budget prepared for a specific period in the future that serves as a plan for the company's operations and financial activities.

Budgeting Formulas

Mathematical expressions or equations used to forecast and manage financial resources by estimating incomes and expenditures.

Selling and Administrative Expenses

Costs incurred by a business that are not directly related to the production of goods or services, such as sales personnel salaries, advertising, and office supplies.