Altertech Inc The Required Volume of Output to Produce the Circuit Boards

question 98

Multiple Choice

Altertech Inc.manufactures a product that contains a circuit board.The company has always purchased this circuit board from a supplier for $32 each.Altertech recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the circuit board instead of buying it.The company prepared the following per unit cost projections of making the circuit board,assuming that overhead is allocated to the part at the normal predetermined overhead rate of 110% of direct labor cost.
$$\begin{array} { l l } \text { Direct materials } & \$ 2 \\\text { Direct labor } &2 0 \\\text { Overhead (fixed and } & 2 2 \\\text { variable) } & \\\text { Total } & \$ 44\end{array}$$
The required volume of output to produce the circuit boards will not require any incremental fixed overhead.Incremental variable overhead cost is $3 per circuit board.What is the effect on income if Altertech decides to make the circuit boards?

• A) Income will decrease by $7 per unit.
• B) Income will increase by $7 per unit.
• C) Income will increase by $12 per unit.
• D) Income will decrease by $12 per unit.
• E) Income will increase by $10 per unit.

Recognize the limitations of diversification in reducing portfolio risk.

Distinguish between systematic and nonsystematic risk in the context of the single-index model and portfolio management.

Interpret the security characteristic line (SCL) and its components, including alpha and beta.

Analyze factors influencing beta coefficients of stocks.

---

Definitions:

Dependent Variable

A variable in scientific research or statistical modeling that is expected to change or respond when another variable (the independent variable) is altered.

Independent Variable

In an experiment, it is the variable that is manipulated or changed to observe its effects on the dependent variable.

Residual Analysis

The analysis of the residuals used to determine whether the assumptions made about the regression model appear to be valid. Residual analysis is also used to identify outliers and influential observations.

Regression Model

A statistical technique used to estimate the relationship between a dependent variable and one or more independent variables.