Alpha CoCan Produce a Unit of Beta for the Following Costs

question 2

Multiple Choice

Alpha Co.can produce a unit of Beta for the following costs:
$$\begin{array} {lr} \text{Direct material}&&\$8\\\text{Direct labor}&&24\\\text{Overhead}&&\underline{40}\\\text{Total costs per unit}&&\underline{\$72}\end{array}$$
An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit.If Alpha buys from the supplier,Alpha will still incur 40% of its overhead.Alpha should:

• A) Buy Beta since the relevant cost to make it is $72.
• B) Make Beta since the relevant cost to make it is $56.
• C) Buy Beta since the relevant cost to make it is $48.
• D) Make Beta since the relevant cost to make it is $48.
• E) Buy Beta since the relevant cost to make it is $56.

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Definitions:

Validity

Validity refers to the degree to which a test or measurement accurately reflects or assesses the intended specific concept or attribute.

Reliability

The extent to which a measurement is free from random error.

Acceptability

The degree to which a concept, action, or thing is regarded as suitable or satisfactory by a group or society.

Specificity

The degree to which something is precise, detailed, or strictly defined.