Acct 2302

Kampmann Corporation is presently making part 295 that is used in one of ts products. A total of 5000 mis o art are produced and used every year. The company's Accounting Department reports the following costs of he part at this level of activity Per Unit 3.50 $7.10 $1.30 $5.00 $5.4 $8.60 Direct materials Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead An outside supplier has offered to make and sell the part to the company for $24.10 each. If this offer is accepted, the supervisor's salary and all of the variable costs can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part Z95 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income? A. Net operating income would decrease by $36,000 per year B. Net operating income would decrease by $34,000 per year C. Net operating income would increase by $34,000 per year D. Net operating income would increase by $36,000 per year. 6. The standard cost card of a particular product specifies that it requires 4.5 direct labor-hours at $12.80 per direct labor- hour. During March, 2,300 units of the product were produced and direct labor wages of $128,300 were incurred. A total of 11,700 direct labor-hours were worked. The direct labor variances for the month were: Labor Rate Variance $4,180 F $4,180 F $21,460 F $21,460 F Labor Efficiency Variance $14,804 U $17,280 U $14,804 U $17,280 U B) D) A. Option A B. Option B C. Option C D. Option D