Sparrow Co

question 46

Multiple Choice

Sparrow Co.is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $8.00 a unit.The unit cost for Sparrow Co.to make the part is $9.00,which includes $0.60 of fixed costs.If 4,000 units of the part are normally purchased each year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease for making the part rather than purchasing it?

• A) $12,000 cost decrease
• B) $4,000 cost increase
• C) $20,000 cost decrease
• D) $1,600 cost increase

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Definitions:

Left Hemisphere

The left side of the brain, traditionally associated with logical thinking, analysis, and detail, as well as control over the right side of the body.

Wernicke's Area

A region of the brain important for language comprehension, located in the temporal lobe on the left hemisphere.

Broca's Area

A region of the brain located in the frontal lobe, associated with the production of speech and language processing.