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

question 145

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.Assume that all of the fixed overhead is allocated and can NOT be avoided.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.

Recognize the role of technology and methods to reduce research costs.

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Definitions:

Manual Dexterity

The skill and ease in using the hands, often required for tasks involving small, precise movements.

Gardner's Eight Intelligences

A theory that proposes eight different forms of intelligence, such as linguistic, logical-mathematical, and musical, that individuals possess in varying degrees.

IQ Score

A measure of a person's intelligence as indicated by an intelligence test, relative to the age of the individual.

Manual Dexterity

The skillful use of one's hands when performing tasks.