A Firm Currently Makes a Component, and Requires 30 000

question 41

Multiple Choice

A firm currently makes a component, and requires 30 000 of them for the coming year's production. Another supplier has offered the part at a delivered price of $3 per unit. It would cost $3000 to check purchased units for quality. Product costs per unit for the past year were $2.35 variable and $1 fixed based on 30 000 units. If the component was bought, fixed overhead would be reduced by $6000, the cost of leasing specialised equipment. The space vacated by the equipment can be rented for $4000 for the year. Which of the following statements is the correct quantitative analysis of the make or buy decision?

• A) The buy option costs $12 500 more than the make option.
• B) The buy option costs $12 500 less than the make option.
• C) The buy option costs $10 500 more than the make option.
• D) The firm is indifferent between the two options.

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Definitions:

Removal

The act of transferring a case from one court to another, typically from a state court to a federal court in the legal context.

Nerve Center

The core location or facility from which the control and coordination of activities are directed, often used in the context of business operations or network operations.

Subject-Matter Jurisdiction

The power of a court to adjudicate cases of a certain nature or those pertaining to a specified subject area.

Final Judgment

A court's last decision or ruling in a case, which resolves the dispute and is enforceable by law.