Pronto Ltd manufactures photo frames and photo albums but 15 000 units of photo frames could be purchased for $5.00 each. The per-unit costs of production for these frames are: Should the frames be purchased instead of being made?
A) No, because it saves $1.50 per unit.
B) No, because it saves $0.50 per unit.
C) Yes, because it saves $2.00 per unit.
D) Yes, because it saves $5.00 per unit.

Question

Pronto Ltd manufactures photo frames and photo albums but 15 000 units of photo frames could be purchased for $5.00 each. The per-unit costs of production for these frames are:  Should the frames be purchased instead of being made?
A) No, because it saves $1.50 per unit. 
B) No, because it saves $0.50 per unit. 
C) Yes, because it saves $2.00 per unit. 
D) Yes, because it saves $5.00 per unit.

Quizplus · Accepted Answer

The per-unit cost of production for the photo frames is $7.00, but they could be purchased for $5.00 each. Therefore, purchasing the frames instead of making them would save $2.00 per unit.

Pronto Ltd Manufactures Photo Frames and Photo Albums but 15