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Browser+Webcam Golden Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials
Browser+Webcam Golden Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials $50,000 Direct labour 10,000 Variable overhead costs 30,000 Fixed overhead costs 20.000 Total costs $110.000 12 21 It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Golden Engine Company has the option of purchasing the part from an outside supplier a $85 per unit. If Golden Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total $92,000 $100,000 $98,000
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