Giga-Stuff, Inc Sophistosand Has the Capacity to Make 400,000 Units of Component

question 2

Multiple Choice

Giga-Stuff, Inc.Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes component X, which is used in the manufacture of DVD players. Another division, Videostuff, makes DVD players and needs 60,000 units of component X per year. Sophistosand incurs the following costs for one unit of component X: $$\begin{array} { l l } \text { Direct materials } & \$ 0.30 \\\text { Direct labour } & 0.15 \\\text { Variable overhead } & 0.70 \\\text { Fixed overhead } & \underline { 1.00 } \\\text { Total } & \underline { \$ 2.15 }\end{array}$$ Sophistosand has the capacity to make 400,000 units of component X per year but, due to a soft market, plans to produce and sell only 320,000 units next year. Videostuff currently buys component X from an outside supplier for $2.50 each (the same price that Sophistosand receives) .
-Refer to Giga-Stuff, Inc. Assume that Sophistosand and Videostuff have agreed on a transfer price of $2.20. What are the total cost savings for Videostuff?

• A) $18,000
• B) $63,000
• C) $69,000
• D) $81,000

---

Definitions:

Immediate Changes

Refers to alterations or effects that occur directly following an intervention or event, without significant delay.

Long-term Changes

Pertains to alterations or developments that occur over an extended period, often analyzed in various fields such as environmental science, economics, and social studies to assess trends or impacts.

Clients' Functioning

Refers to the effectiveness and well-being of individuals receiving services in various domains, including social, psychological, and physical aspects.

Qualitative Counseling

A therapeutic approach focusing on understanding clients' experiences and perspectives through open-ended dialogue and interpretation.