Use the Following Information to Answer the Questions Below

question 12

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. For what range of output would you prefer to make?

• A) 30,000 or more units per year
• B) 0 - 30,000 units per year
• C) 0 - 40,000 units per year
• D) 40,000 or more units per year

Distinguish between variable and fixed costs in the context of product and period cost classifications.

Understand the importance of direct and indirect costs in cost accounting.

Comprehend the concept of manufacturing overhead and how it's applied in cost accounting.

Recognize the treatment of different types of costs in external financial reporting.

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Definitions:

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue, indicating the company's financial performance over a period.

Net Cash Flow

The difference between a company's cash inflows and outflows within a given period, indicating the company's cash liquidity.

Accounts Receivable

Payables to a company from clients for the use or delivery of goods or services, not yet reimbursed.

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.