Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Masse Corporation uses part G18 in one of its products. The company's Accounting Department reports the following costs of producing the 16,800 units of the
Masse Corporation uses part G18 in one of its products. The company's Accounting Department reports the following costs of producing the 16,800 units of the part that are needed every year Per Unit $4.00 $4.70 $7.70 $8.40 Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general $9.00 $6.00 overhead An outside supplier has offered to make the part and sell it to the company for $33.00 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 $22,800 of these allocated general overhead costs would be avoided. In addition, the space used to produce part G18 could be used to make more of one of the company's other products, generating an additional segment margin of $30,000 per year for that product Required: a. Calculate the effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company. (Input the amount as a positive value. Omit the "$" sign in your response.) Net operating income would be (Click to select)by $ b. Which alternative should the company choose? Make OBuy
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started