Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brook Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 30,000 units of the slip differential

Brook Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 30,000 units of the slip differential each month. At this activity level, unit costs are

Direct materials......................................................................................

$4

Direct labor............................................................................................

3

Variable manufacturing overhead.....................................................................................

4

Fixed manufacturing overhead.....................................................................................

5

Variable selling..........................................................................................

3

Fixed selling..........................................................................................

1

An outside supplier has offered to produce the slip differentials for Evan Company, and to ship them directly to Evan Company's customers. This arrangement would permit Evan Company to reduce its variable selling expenses by one third (due to elimination of freight costs). The facilities now being used to produce the slip differentials would be idle and fixed manufacturing overhead would continue at 60 percent of its present level. The total fixed selling expenses of the company would be unaffected by this decision.

What is the maximum acceptable price quotation for the slip differentials from the outside supplier?

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

Principles Of Auditing And Other Assurance Services

Authors: Ray Whittington, Kurt Pany

19th International Edition

125909524X, 9781259095245

More Books

Students also viewed these Accounting questions