Frederick Co

question 68

Multiple Choice

Frederick Co. is thinking about having one of its products manufactured by an outside supplier. Currently, the cost of manufacturing 5,000 units is:
If Frederick can buy 5,000 units from an outside supplier for $130,000, it should:

• A) Make the product because current factory overhead is less than $130,000.
• B) Make the product because the cost of direct material plus direct labor of manufacturing is less than $130,000.
• C) Make the product because factory overhead is a sunk cost.
• D) Buy the product because total fixed and variable manufacturing costs are greater than $130,000.
• E) Buy the product because the total incremental costs of manufacturing are greater than $130,000.

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Definitions:

Market Income

The total income earned by an individual or household from market sources before taxes and transfers, including wages, rent, interest, and profits.

Disposable Income

The sum of funds households can allocate towards savings or expenditure once income taxes are deducted.

Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers may legally pay to workers.

Federal Minimum Wage

The lowest legal hourly wage that employers can pay to workers in the United States.