Frank CoIs Currently Operating at 80% of Capacity and Is Currently

question 92

Multiple Choice

Frank Co.is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit.The unit cost for Frank Co.to make the part is $30, which includes $3 of fixed costs.If 20,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it?

• A) $60,000 decrease
• B) $40,000 decrease
• C) $40,000 increase
• D) $60,000 increase

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Definitions:

Communication Pathways

The routes through which information is transmitted and received within an organization or network.

Decision Making

The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.

Resource Allocation

The process of distributing available resources among varying demands or projects.

Critical Thinking

The goal-oriented examination and assessment of a matter to establish an opinion.