Finefurniture Ltd has the opportunity to purchase componentry in sufficient quantities at $5.50 per chair. Currently Finefurniture Ltd makes the components for 7000 chairs at the following costs: A saving of 20% of fixed overhead would occur if the components were bought. Should the component be bought, and why?
A) No, increased cost of $0.36 per chair.
B) No, increased cost of $1.50 per chair.
C) Yes, cost savings of $1 per chair.
D) Yes, cost savings of $0.50 per chair.

Question

Finefurniture Ltd has the opportunity to purchase componentry in sufficient quantities at $5.50 per chair. Currently Finefurniture Ltd makes the components for 7000 chairs at the following costs:  A saving of 20% of fixed overhead would occur if the components were bought. Should the component be bought, and why?
A) No, increased cost of $0.36 per chair. 
B) No, increased cost of $1.50 per chair. 
C) Yes, cost savings of $1 per chair. 
D) Yes, cost savings of $0.50 per chair.

Quizplus · Accepted Answer

The Answer of Finefurniture Ltd has the opportunity to purchase componentry in sufficient quantities at $5.50 per chair. Currently Finefurniture Ltd makes the components for 7000 chairs at the following costs:  A saving of 20% of fixed overhead would occur if the components were bought. Should the component be bought, and why?
A) No, increased cost of $0.36 per chair. 
B) No, increased cost of $1.50 per chair. 
C) Yes, cost savings of $1 per chair. 
D) Yes, cost savings of $0.50 per chair.

Finefurniture Ltd Has the Opportunity to Purchase Componentry in Sufficient