A company makes and sells a range of products. The standard details per unit for one of these products, product X, are as follows. To meet sales demand, the company must obtain 2,000 units of product X next month. There is sufficient labour capacity to produce 1,500 of these units in-house during normal time. However, any production above this level would require overtime working which would be paid at a premium of 50%. The company can buy as many units of product X as it wishes next month from an external supplier at a price of $120 per unit. What is the total financial benefit to the company of purchasing the appropriate number of units from the external supplier rather than producing them in-house?
A) $20,000
B) $30,000
C) $27,500
D) $5,000

Question

A company makes and sells a range of products. The standard details per unit for one of these products, product X, are as follows.  To meet sales demand, the company must obtain 2,000 units of product X next month. There is sufficient labour capacity to produce 1,500 of these units in-house during normal time. However, any production above this level would require overtime working which would be paid at a premium of 50%. The company can buy as many units of product X as it wishes next month from an external supplier at a price of $120 per unit. What is the total financial benefit to the company of purchasing the appropriate number of units from the external supplier rather than producing them in-house?
A) $20,000 
B) $30,000 
C) $27,500 
D) $5,000

Quizplus · Accepted Answer

The Answer of A company makes and sells a range of products. The standard details per unit for one of these products, product X, are as follows.  To meet sales demand, the company must obtain 2,000 units of product X next month. There is sufficient labour capacity to produce 1,500 of these units in-house during normal time. However, any production above this level would require overtime working which would be paid at a premium of 50%. The company can buy as many units of product X as it wishes next month from an external supplier at a price of $120 per unit. What is the total financial benefit to the company of purchasing the appropriate number of units from the external supplier rather than producing them in-house?
A) $20,000 
B) $30,000 
C) $27,500 
D) $5,000

A Company Makes and Sells a Range of Products