Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Barnes Company makes 10,000 units of Part A per year. The product cost of Part A is provided as follows: Direct materials $30/unit Direct labor

Barnes Company makes 10,000 units of Part A per year. The product cost of Part A is provided as follows:

Direct materials $30/unit

Direct labor ..$15/unit

Variable manufacturing overhead.$ 5/unit

Cost of manager who will be fired if Part A is no longer produced internally ...$50,000

Depreciation per year of special equipment (with no resale value) ......... $40,000

Other fixed manufacturing overhead for the whole company .. .$100,000

The Other fixed manufacturing overhead for the whole company will not be affected by the decision to make or buy Part A.

(1) An outside supplier has offered to sell the company all of these parts it needs for $57 a unit. What will be the change in Barnes Companys net income if it accepts this offer?

(2) Now, if the company accepts this offer as described in question (1), the facilities now being used to make Part A could be used to make 10,000 units of Part B per year. The contribution margin on Part B would be $5/unit. What will be the change in Barnes Companys net income if it accepts this offer as described in question (1)?

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

The Process Approach Audit Checklist For Manufacturing

Authors: Karen Welch

1st Edition

0873896440, 978-0873896443

More Books

Students also viewed these Accounting questions

Question

7. List behaviors to improve effective leadership in meetings

Answered: 1 week ago

Question

6. Explain the six-step group decision process

Answered: 1 week ago