Use the following to answer the questions below.
You currently purchase a part used in your production process from an outside supplier,and have decided to begin making this part in-house.You have two equipment options for moving production in-house: special-purpose equipment and general-purpose equipment.Cost information for these two options is as follows:

-Refer to the instruction above.What are total costs under the Special-Purpose Equipment option for an annual quantity of 40,000 units?
A)$400,000
B)$500,000
C)$800,000
D)$850,000

Question

Use the following to answer the questions below.
You currently purchase a part used in your production process from an outside supplier,and have decided to begin making this part in-house.You have two equipment options for moving production in-house: special-purpose equipment and general-purpose equipment.Cost information for these two options is as follows:
 
-Refer to the instruction above.What are total costs under the Special-Purpose Equipment option for an annual quantity of 40,000 units?
A)$400,000 
B)$500,000 
C)$800,000 
D)$850,000

Quizplus · Accepted Answer

Under the Special-Purpose Equipment option, the total cost for an annual quantity of 40,000 units is $800,000. This is lower than the total cost of $850,000 under the General-Purpose Equipment option for the same quantity. Therefore, the best choice is to go with the Special-Purpose Equipment option.

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