Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Flounder Manufacturing makes recreational motor boats. The company currently manufactures all the components themselves but have been approached by an outside supplier to provide the

image text in transcribed

Flounder Manufacturing makes recreational motor boats. The company currently manufactures all the components themselves but have been approached by an outside supplier to provide the motors for the boats. The outside supplier is offering to sell|| Flounder the motors for $120 each. The following is the cost information for producing the motors internally: Per unit Direct materials Direct Labour Variable manufacturing overhead Fixed manufacturing overhead $55.00 $30.00 $20.00 $20.00 10,000 motors per year $550,000 $300,000 $200,0004 $200,000 Totale $125.00 $1.250.000 The fixed manufacturing overhead are common cost that are allocated to the motors and are unavoidable if Flounder stops making the motors. Required: A) Assuming the company has no alternative use for the facilities now being used to produce the motors, should the outside supplier's offer be accepted? Show all calculations. B) Suppose that if the motors were purchased. Flounder Manufacturing could use the freed capacity to launch a new product. The contribution margin of the new product is $200,000 per year. Should Flounder Manufacturing accept the offer to buy the motors from the outside supplier for $120 each. Show all calculations

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

Essential Audit And Assurance 2022

Authors: Nick Blackwell, Emile Woolf International

1st Edition

1848439326, 978-1848439320

More Books

Students also viewed these Accounting questions

Question

Guidelines for Informative Speeches?

Answered: 1 week ago