Answer the following statements true (T) or false (F)
1. A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract cost of $28 each. Currently, the cost of producing circuits in-house includes variable costs of $26 per circuit and fixed costs of $5,000 per month. The controller says that they should outsource production of the circuit, if it reduces fixed cost more than $200 per month. Is this statement true or false?
2. Deeper Clean Company makes bulk quantities of cleaning fluids. They currently sell 1,300 containers a month at a sales price of $24 per unit. If they add a new scent, they could charge $28 per unit for the improved product. It would cost them a total of $900 per month to make that alteration. If they decide to process further, it will improve their operating income.
3. Blue Streak Company makes a special kind of racing tire. Variable costs are $340, and fixed costs are $35,500 per month. Blue Streak sells 610 units per month at a sales price of $410. If Blue Streak upgrades the quality of the tire, management believes that the sales price can be increased to $450. If so, the variable cost will increase to $350, and the fixed costs will rise by 30%. The CEO wishes to increase his operating income by at least 20%. If the company decides to upgrade the product, the CEO will reach his goal.
1. TRUE
2. TRUE
3. TRUE
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Indicate whether the statement is true or false
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