Textel Is Thinking About Having One of Its Products Manufactured

question 92

Multiple Choice

Textel is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows:
If Textel can buy 1,000 units from a subcontractor for $100,000, it should:

• A) Make the product because current factory overhead is less than $100,000.
• B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
• C) Buy the product because the total incremental costs of manufacturing are greater than $100,000.
• D) Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
• E) Make the product because factory overhead is a sunk cost.

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Definitions:

Drinking

The act of consuming liquids; in social contexts, it often refers specifically to the consumption of alcoholic beverages.

Comments

Observations or statements made about something, often expressing a personal opinion or reaction.

Low Distinctiveness

A situation in which an individual's behavior does not vary much across different contexts or situations, indicating a possible stable personality trait or characteristic.

Kelley's Covariation Model

A psychological theory proposed by Harold Kelley that explains how individuals attribute cause to events based on the consistency, distinctiveness, and consensus of the information available.