Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

River Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a

image text in transcribedimage text in transcribedimage text in transcribed River Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $13.00 per unit. River Enterprises' current cost is $15.00 per unit of the component, based on the 115,000 components that River Enterprises currently produces. Read the requirements. This current cost per unit is based on the following calculations: (Click the icon to view the information.) None of River Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $33,000 of contribution margin per year. Requirement 1. If River Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) 1. If River Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit River Enterprises would be willing to pay if it outsources the component

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

Computer Aided Fraud Prevention And Detection A Step By Step Guide

Authors: David Coderre

1st Edition

0470392436, 978-0470392430

More Books

Students also viewed these Accounting questions