Question 26

The SP Corporation makes 36,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct nateriala Direct labor Variable manufacturing overhead Fixed manufacturing overhead $9.50 $8.50 $3.45 $4.40 An outside supplier recently began producing a comparable motor that coud be used In the sewing machine. The price offered to SP Corporation for this motor is $23.95. If SP Corporation decides not to make the motors, there would be no other use for the production facilties and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multipie Choice O ($68,400y 214,200 90,000 $158,400