Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fillip Corporation makes 5,700 units of part U13 each year. This part is used in one of the company's products. The company's Accounting Department reports

Fillip Corporation makes 5,700 units of part U13 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $9.60 Direct labor $7.80 Variable manufacturing overhead $10.20 Supervisor's salary $5.90 Depreciation of special equipment $8.80 Allocated general overhead $8.00 An outside supplier has offered to make and sell the part to the company for $25.10 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, 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. If the outside supplier's offer were accepted, only $3,850 of these allocated general overhead costs would be avoided. In addition, the space used to produce part U13 would be used to make more of one of the company's other products, generating an additional segment margin of $14,700 per year for that product. What would be the impact on the company's overall net operating income of buying part U13 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

Loose Leaf Fundamental Financial Accounting Concepts

Authors: Thomas Edmonds, Frances McNair, Philip Olds

8th Edition

0077433807, 978-0077433802

More Books

Students also viewed these Accounting questions

Question

Guidelines for Informative Speeches?

Answered: 1 week ago