Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

29 Question 29 Company X was recently approached by a supplier that would like to sell Company X a part. Company X currently builds the

29
image text in transcribed
Question 29 Company X was recently approached by a supplier that would like to sell Company X a part. Company X currently builds the part themselves. The company uses 12,000 of the parts per year. Unit costs for the part at a productions level of 12,000 parts are as follows: Direct materials $ 7.50 Direct labor 4.50 Variable manufacturing overhead 0.30 Fixed manufacturing overhead 2.30 Unit product cost $ 14.60 Of the fixed manufacturing overhead, 30% is avoidable if the component were bought from the outside supplier. Also, making each part uses 2 minutes on the machine that is the company's current constraint. If the component were bought, the machine time freed could be used on product that requires 5 minutes on the same machine and that has a contribution margin of $4 per unit The supplier is willing to make the part for $12 per unit. Assuming the company does buy the part from the supplier, how would income be impacted? Enter your answer as a positive if income would increase and a negative if it would decrease

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting A Practical Approach

Authors: Jeffrey Slater, Debra Good

14th Canadian Edition

0135222419, 978-0135222416

More Books

Students also viewed these Accounting questions

Question

Explain the causes of indiscipline.

Answered: 1 week ago

Question

Explain the factors influencing wage and salary administration.

Answered: 1 week ago