Laskowski Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable

question 82

Multiple Choice

Laskowski Company manufactures a part for its production cycle.The annual costs per unit for 5,000 units of the part are as follows:
$\begin{array}{ll}&\text { Per Unit }\\\text { Direct materials } & \$ 3.00 \\\text { Direct labor } & 5.00 \\\text { Variable factory overhead } & 4.00 \\\text { Fixed factory overhead } & \underline{2.00} \\\text { Total costs } & \$ 14.00\end{array}$
The fixed factory overhead costs are unavoidable.Hendricks Company has offered to sell 5,000 units of the same part to Laskowski Company for $14 per unit.The facilities currently used for the part could be used to make 5,000 units annually of a new product that would contribute $5 a unit to fixed expenses.No additional fixed costs would be incurred with the new product.Laskowski Company should ________.

• A) make the part to save $5,000
• B) make the part to save $15,000
• C) make the new product and buy the part to save $5,000
• D) make the new product and buy the part to save $15,000

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Definitions:

Major Premise

The first principle or statement in a deductive argument from which a conclusion is derived.

Valid Syllogism

A form of deductive reasoning where, from two given premises, a logically inevitable conclusion is derived.

I Proposition

In the traditional square of opposition, an I proposition is a form of categorical proposition which affirms some, but not necessarily all, members of a class are included in another class.

Validity Rules

Principles or guidelines used to determine the logical correctness of an argument, ensuring that if the premises are true, the conclusion must also be true.