Assume That Factory Space Freed Up by Purchasing the Part

question 71

Multiple Choice

Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $2,000 profit. If Andrew Corporation makes the part, what will its operating income be?

• A) $1,000 less than if the company bought the part
• B) $5,000 greater than if the company bought the part
• C) $1,000 greater than if the company bought the part
• D) $2,000 greater than if the company bought the part

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Definitions:

Peter Drucker

A pioneering management consultant, educator, and author, whose extensive writings on management practices and business philosophies have had a significant influence on modern organizational management.

Operating Objectives

Specific, short-term aims that guide the operations of an organization, focusing on efficient and effective achievement of core operational goals.

Financial Capital

The funds and resources available to a business for use in the production of goods or services, including investments, cash, and other assets.

Core Competencies

Fundamental strengths and strategic advantages of an organization or individual, which are central to its identity and performance.