Use the Following Information to Answer the Questions Below

question 21

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 does the company save for the year by selecting the low-cost option (for annual requirements of 40,000 units) ?

• A) $150,000
• B) $300,000
• C) $50,000
• D) $40,000

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Definitions:

Customer Service Department

A designated division within a company focused on addressing customer inquiries, complaints, and support needs.

Time-Driven Activity-Based Costing

A costing method where costs are assigned based on the activities required for production and the amount of time each activity takes.

Customer Service Department

A division within a company that handles all interactions with customers, focusing on providing assistance, resolving issues, and ensuring satisfaction.

Customer Cost Analysis

A process of analyzing the costs associated with acquiring and servicing customers, often used to determine profitability by customer.