Question
Outlet Company manufactures plugs at a cost of $38 per unit, which includes $10 of fixed overhead. Outlet needs 30,000 of these plugs annually (as
Outlet Company manufactures plugs at a cost of $38 per unit, which includes $10 of fixed overhead. Outlet needs 30,000 of these plugs annually (as part of a larger product it produces). Wire Company has offered to sell these units to Outlet at $34 per unit. If Outlet decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs.
If Outlet Company purchases the plugs but does not rent the unused facility, the company would:
Outlet Company manufactures plugs at a cost of $38 per unit, which includes $10 of fixed overhead. Outlet needs 30,000 of these plugs annually (as part of a larger product it produces). Wire Company has offered to sell these units to Outlet at $34 per unit. If Outlet decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs.
If Outlet Company purchases the plugs but does not rent the unused facility, the company would:
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
9780470374948, 470423684, 470374942, 978-0470423684
