Pitkin Company Produces a Part Used in the Manufacture of One

question 52

Multiple Choice

Pitkin Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows: An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be:

• A)$3 advantage
• B)$1 advantage
• C)$1 disadvantage
• D)$4 disadvantage

Recognize the diverse applications of PR across different sectors.

Identify the role of PR in promoting political and social causes.

Understand how to apply the Dividend Discount Model (DDM) to determine the intrinsic value of a stock.

Comprehend the concept of market capitalization rate and its impact on stock valuation.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes, have been deducted from total revenue.

Selling Expenses

Costs incurred directly and indirectly in selling a product, including advertising, shipping, and sales staff salaries.

Merchandise

Goods that have been purchased for resale, typically in a retail environment.

Sales to Total Assets Ratio

A financial metric that measures how efficiently a company is using its assets to generate sales.