Question
Beal Company manufactures exhaust systems used in its personal watercraft at a cost of $43 per unit. The cost consists of $16 of direct materials,
Beal Company manufactures exhaust systems used in its personal watercraft at a cost of $43 per unit. The cost consists of $16 of direct materials, $8 of direct labor, and $19 of overhead ($11 variable and $8 fixed.) 700 units are manufactured each month. $3 of the fixed overhead costs per unit are unavoidable, and would be absorbed by other departments if production were outsourced.
A representative from Wall Corp. has offered to sell Beal identically functioning exhaust systems for $41 per unit. If Beal accepts the offer, by what amount will monthly net income (decrease)?
a). $1,400
b). $(1,400)
c). $(11,900)
d). $(4,200)
e). $(700)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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