Tela Company Makes a 3-In-1 Product That Combines a Printer

question 89

Multiple Choice

Tela Company makes a 3-in-1 product that combines a printer, fax machine, and copier for home use. Currently, Tela makes all components of the 3-in-1 machine in-house. An outside company has offered to supply one component, part number B48, for $8 each. Tela uses 15,000 of these components per year. Costs of B48 are as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 2.00 \\\text { Variable overhead } & 1.50 \\\text { Fixed overhead } & 3.00\end{array}$
-Refer to the Figure.Suppose that 40% of the fixed overhead is avoidable if part B48 is NOT made by Tela.Should Tela purchase the part from the outside supplier,and what is the financial effect?

• A)No, income will decrease by $10,500.
• B)No, income will decrease by $7,500.
• C)Yes, income will increase by $7,500.
• D)Yes, income will increase by $10,500.

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Definitions:

Complexity Categories

Different levels or types of complexity used to classify systems or problems based on their intricacy and the challenge they present.

Project Management Infrastructure

Project management infrastructure refers to the organization's framework consisting of processes, tools, and methodologies used for effectively managing projects.

Initiation Phase

The first phase of a project lifecycle, involving the definition and authorization of the project.

Technology Familiarity

The level of understanding and comfort an individual or organization has with using specific technologies.