Question
28. The Syracuse Milling Company manufactures an intermediate product identified as W1. Variable manufacturing costs per unit of W1 are as follows: Direct materials 5
28. The Syracuse Milling Company manufactures an intermediate product identified as W1. Variable manufacturing costs per unit of W1 are as follows:
Direct materials 5
Direct labor 15
VARIABLE MANUFACTURING OVERHEAD 10
Ithaca Tooling has offered to sell Syracuse Milling 10,000 units of W1 for $40 per unit. If Syracuse Milling accepts the offer, $50,000 of fixed manufacturing overhead will be eliminated. Applying differential analysis to the situation, Syracuse Milling should:
Select one:
a.Buy W1; the savings is $100,000
b.Buy W1; the savings is $50,000
c.Make W1; the savings is $50,000
d.Make W1; the savings is $100,000
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