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Part U1G is used by Mcvean Corporation to make one of its products. A total of 15.000 units of this part are produced and used
Part U1G is used by Mcvean Corporation to make one of its products. A total of 15.000 units of this part are produced and used every year. The company's Accounting Department reports the folowing costs of producing the pant at this level of activity: An outside supplier has offered to make the part and sell it to the company for $26.30 each. If this otfer is accepted, the supervisor's salary and all of the variable costs including the direct labot, can be avoided. The special equipment used to make the part was purchased maty years ago and has no salvage value or other use. The aliocated general overhead represents foxed costs of the entire company none of which woutd be avoided if the part were purchased instead of produced intemally in addition, the space used to make part U16 could be used to make more of one of the company/s other products. generating an odditional segment margin of $27000 per year for that product. The annual financial odvantage (disadvantage) for the company as a result of buying part U16 from the outside supplier should be: Muitiple Choce $27.000 (ST)500)
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