Priestly Automobiles Company Fabricates Automobiles

question 45

Multiple Choice

Priestly Automobiles Company fabricates automobiles.Each vehicle includes one wiring harness,which is currently made in-house.Details of the harness fabrication are as follows:

An Indonesian factory has offered to supply Priestly with ready-made units for a price of $13 per wiring harness.Assume that Priestly's fixed costs are unavoidable,but that Priestly could use the vacated production facilities to earn an additional $9,500 of profit per month.If Priestly decides to outsource,monthly operating income will ________.

• A)increase by $5,500
• B)decrease by $14,000
• C)increase by $9,500
• D)decrease by $26,300

---

Definitions:

ESOPs

Employee Stock Ownership Plans, programs that provide a company's workforce with an ownership interest in the company.

Stock Certificates

Physical documents that represent ownership of a particular number of shares in a corporation.

Semi-permanent

Referring to something not designed to last indefinitely but also not intended for quick disposal or replacement; having a medium-term duration.

Work

The exertion of effort towards achieving a goal, often associated with professional or employment activities but also applicable to tasks and responsibilities.