NG, Inc Currently Buys 9,000 Subcomponents from an Outside Supplier at at $10

question 28

Multiple Choice

N.G., Inc. currently buys 9,000 subcomponents from an outside supplier at $10 each. The company has excess capacity, which it sublets to another company for $20,000 per year. If the company were to use the idle capacity to produce the subcomponent internally, it would incur variable production costs of $6 per unit, and it would hire a new supervisor for $15,000 per year. Other fixed overhead costs would not change, but the average overhead cost per subcomponent unit would be $2. What is the advantage or disadvantage (in dollars) if N.G. makes the subcomponent instead of continuing to buy outside and subletting the excess capacity?

• A) $6,000 disadvantage
• B) $21,000 disadvantage
• C) $1,000 advantage
• D) $21,000 advantage

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Definitions:

Ultrasonic Stimulation

The use of high-frequency sound waves in research or medical treatment to affect biological organisms or tissues.

Neural Circuit

A network of neurons interconnected by synapses, forming a system that processes specific types of information and generates responses.

Central Pattern Generator

Neural networks that produce rhythmic patterned outputs without sensory feedback, controlling activities such as walking, swimming, and breathing.

Neurons

Specialized cells within the nervous system that transmit information to other nerve cells, muscle, or gland cells.