Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Kirsten Corporation makes 100.000 units per year of a part called a B345 gasket for use in one of its products. Data concerning the unit

image text in transcribed
Kirsten Corporation makes 100.000 units per year of a part called a B345 gasket for use in one of its products. Data concerning the unit production costs of the B345 gasket follow: Direct materials.. $0.15 Direct labor...... 0.10 Variable manufacturing overhead ....... 0.13 Fixed manufacturing overhead... 0.24 Total manufacturing cost per unit ....... $0.62 An outside supplier has offered to sell Kirsten Corporation all of the B345 gaskets it requires. If Kirsten Corporation decided to discontinue making the B345 gaskets, 25% of the above fixed manufacturing overhead costs could be avoided. Required: a. Assume Kirsten Corporation has no alternative use for the facilities presently devoted to production of the B345 gaskets. If the outside supplier offers to sell the gaskets for $0.46 each, should Kirsten Corporation accept the offer? Fully support your answer with appropriate calculations. b. Assume that Kirsten Corporation could use the facilities presently devoted to production of the B345 gaskets to expand production of another product that would yield an additional contribution margin of $10,000 annually. What is the maximum price Kirsten Corporation should be willing to pay the outside supplier for B345 gaskets

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_2

Step: 3

blur-text-image_3

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

The Internal Auditors Guide To Risk Assessment

Authors: Rick A. Wright Jr.

2nd Edition

1634540158, 9781634540155

More Books

Students also viewed these Accounting questions

Question

Explain how religious attitudes affect firm behavior.

Answered: 1 week ago

Question

Will formal performance reviews become obsolete? Why or why not?

Answered: 1 week ago