The Talbot Corporation Makes Wheels That It Uses in the Production

question 36

Multiple Choice

The Talbot Corporation makes wheels that it uses in the production of bicycles.Talbot's costs to produce 100, 000 wheels annually are: An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel.If the wheels are purchased from the outside supplier, $15, 000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45, 000 per year.Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would:

• A)increase by $35, 000.
• B)decrease by $10, 000.
• C)increase by $45, 000.
• D)increase by $70, 000.

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Definitions:

Morpheme

The smallest grammatical unit in a language, that cannot be further divided, and carries meaning; for example, -s, un-, and ship in friendships.

Phoneme

A phoneme is the smallest unit of sound in a language that can distinguish one word from another, such as the difference between the /p/ and /b/ sounds in "pat" and "bat."

Words Per Minute

A measure of typing or reading speed, indicating how many words an individual can type or read in one minute.

Prototype

The typical or most familiar example of a category (e.g., a robin is a prototypical bird for many Americans but an auk might be the prototype for Laplanders).