Question
Hi I need help with this quesiton Part O43 is used in one of ABC Corporation's products. The company's Accounting Department reports the following costs
Hi I need help with this quesiton
Part O43 is used in one of ABC Corporation's products. The company's Accounting Department reports the following costs of producing the 15,100 units of the part that are needed every year.
Per UnitDirect materials$2.00Direct labor$3.00Variable overhead$5.80Supervisor's salary$6.30Depreciation of special equipment$7.40Allocated general overhead$4.50
An outside supplier has offered to make the part and sell it to the company for $24.00 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 $21,100 of these allocated general overhead costs would be avoided.
Required:
Net operating income would be(Click to select)
increase or
decrease
by $.
b.Which alternative should the company choose?
Make or Buy
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