Answered step by step
Verified Expert Solution
Question
1 Approved Answer
011. The Company makes 1,000 units per year of a part it uses in the products i manufacures. The unit product cost of this part
011. The Company makes 1,000 units per year of a part it uses in the products i manufacures. The unit product cost of this part is computed as follows Direct materials Direct labor Variable manufacturing overhead $2 Fixed manufacturing overhead $20 Unit product cost $15 $18 $55 An outside supplier has offered to sell the company all of units it needs at S58 per unit, if the company accepts this offer, the facilities now being used to make the part could be used to make 2,000 units of a product that has a contribution margin of $7 per unit and no new costs. If the part was purchased from the outside supplier, $10 of the fixed manufacturing overhead cost being applied to the part would be eliminated. What is the annual impact to the company's profit if the company buys the part from the supplier instead of making them? a) $8,000 decrease b) $11,000 increase c) $1,000 increase d) $3,000 decrease e) $13,000 decrease
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started