Chafford, Inc. currently manufactures 2,000 subcomponents in one of its factories. The unit costs to produce the subcomponents are: Due to a labor strike, Chafford is considering purchasing the subcomponents from an outside supplier for $250 per unit. The union is demanding a 20% increase in pay for direct labor. Fixed overhead is not avoidable. How much could Chafford increase their pay before it would be more advantageous to purchase the subcomponents from the outside supplier?
A) 5%
B) 15%
C) 50%
D) 75%

Question

Chafford, Inc. currently manufactures 2,000 subcomponents in one of its factories. The unit costs to produce the subcomponents are:  Due to a labor strike, Chafford is considering purchasing the subcomponents from an outside supplier for $250 per unit. The union is demanding a 20% increase in pay for direct labor. Fixed overhead is not avoidable. How much could Chafford increase their pay before it would be more advantageous to purchase the subcomponents from the outside supplier?
A) 5% 
B) 15% 
C) 50% 
D) 75%

Quizplus · Accepted Answer

The Answer of Chafford, Inc. currently manufactures 2,000 subcomponents in one of its factories. The unit costs to produce the subcomponents are:  Due to a labor strike, Chafford is considering purchasing the subcomponents from an outside supplier for $250 per unit. The union is demanding a 20% increase in pay for direct labor. Fixed overhead is not avoidable. How much could Chafford increase their pay before it would be more advantageous to purchase the subcomponents from the outside supplier?
A) 5% 
B) 15% 
C) 50% 
D) 75%