Assume Star Appliance Can Purchase 8,000 Units of the Part

question 145

Multiple Choice

Assume Star Appliance can purchase 8,000 units of the part from the Roger Parts Company for $17.50 each, and the facilities currently used to make the part could be used to manufacture 8,000 units of another product that would have a $5 per unit contribution margin. If no additional fixed costs would be incurred, what should Star Appliance do?

• A) Make the new product and buy the part to earn an extra $8.50 per unit contribution to profit.
• B) Make the new product and buy the part to earn an extra $5.50 per unit contribution to profit.
• C) Continue to make the part to earn an extra $0.50 per unit contribution to profit.
• D) Continue to make the part to earn an extra $2.50 per unit contribution to profit.

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Definitions:

CPM Network

Critical Path Method Network, a project management technique used to estimate the duration of a project and identify the most critical tasks that determine its completion time.

Code Of Ethics

A set of principles and guidelines designed to help professionals conduct business honestly and with integrity.

Crashing

A project management technique used to reduce the time for task completion by increasing the allocation of resources, often leading to higher costs.

CPM Network

A project management tool that uses critical path method (CPM) principles to model the activities and events of a project in a graphical network.