Use the Following Information to Answer the Questions Below

question 52

Multiple Choice

Use the following information to answer the questions below.
You currently make a part for old equipment at a cost of $20 / unit. The annual fixed cost for this equipment is $50,000. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table) .

-Refer to the instruction above. What are total costs to make a quantity of 40,000 units per year?

• A) $400,000
• B) $450,000
• C) $800,000
• D) $850,000

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Definitions:

Top Management

The highest level of managers within an organization, responsible for setting strategic goals and making critical decisions.

Equity Theory

A social psychological theory which posits that individuals gauge the fairness of their work outcomes in relation to others, focusing on the balance between an employee's inputs and the outcomes they receive.

Inequity

A lack of fairness or justice in situations, often leading to disparities in resources, treatment, and opportunities among individuals or groups.

Inputs Or Outcomes

Refers to the resources used or the results achieved in any process or activity, respectively.