Question
Jackson Company manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: Direct materials $150,000 Direct labor $120,000 Variable overhead
Jackson Company manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: Direct materials $150,000 Direct labor $120,000 Variable overhead $80,000 Fixed overhead $100,000 An outside supplier has offered to sell Jackson the component for $19. If Jackson purchases the component from the outside supplier, fixed costs would be reduced by $10,000. The manufacturing facilities would be unused and could be rented out for $10,000. Should Jackson accept the offer? (Points : 5) Yes, because the differential costs decrease by $30,000. No, because the differential costs increase by $30,000. No, because the differential costs increase by $10,000. Yes, because the differential costs decrease by $10,000.
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