Gnome Company Is Trying to Decide Whether to Continue to Manufacture

question 93

Multiple Choice

Gnome Company is trying to decide whether to continue to manufacture a particular component or to buy the component from an outside supplier.Which of the following is RELEVANT to this decision?

• A) The insurance on the manufacturing facility which will continue regardless of the decision
• B) The cost of the equipment that is currently being used to manufacture the component
• C) Allocated corporate fixed costs which would have to be allocated to other products if the component is no longer manufactured
• D) The potential uses of the facilities that are currently used to manufacture the component

Interpret and solve problems related to sales, taxes, and commissions.

Apply mathematical skills to evaluate and solve real-world financial scenarios.

Understand the different types of warranties and their basic categories.

Recognize how express and implied warranties are established and their implications.

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Definitions:

Total Revenue

The total income generated by a company from the sale of goods or services before any expenses are subtracted.

Economies of Scale

Cost advantages that enterprises obtain due to the scale of their operations, leading to a reduction in average costs per unit as output increases.

Decreasing Marginal Product

A principle where each additional unit of input results in a smaller increase in output, after a certain point, indicating declining efficiency.

Total Cost Curve

A graphical representation that illustrates how the total cost of producing a good changes in relation to the quantity produced, considering both fixed and variable costs.