M Corporation Makes Automobile Engines

question 107

Multiple Choice

M Corporation makes automobile engines.The company's records show the following costs to
Manufacture part #308FD:

Another manufacturer has offered to supply M Corporation with part #308FD for a cost of $50 per unit.M Corporation uses 1,000 units annually.If M Corporation accepts the offer,what will be the short-run impact on operating income?

• A)Decrease in profits equal to $8,000.
• B)Decrease in profits equal to $2,000.
• C)Increase in profits equal to $8,000.
• D)Increase in profits equal to $2,000.

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Definitions:

Leisure

Free time spent away from business, work, and domestic chores, often dedicated to relaxation, hobbies, or enjoyment.

Nonlabor Income

Refers to earnings that do not come from employment or work performed but from other sources such as investments, pensions, or inheritance.

Wage Rate

the standard amount of compensation given for labor services per unit of time, often expressed per hour or year.

Lump Sum Payment

A single payment made at a particular time, as opposed to multiple payments over time, often used in contexts like settlements or pensions.