Question
Sheridan Company produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 55000 Direct labor 160000
Sheridan Company produces 5000 units of part A12E. The following costs were incurred for that level of production:
Direct materials | $ 55000 |
Direct labor | 160000 |
Variable overhead | 75000 |
Fixed overhead | 175000 |
If Sheridan buys the part from an outside supplier, $40000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $68, net income will increase (decrease) by
$(10000).
$125000.
$85000.
$(50000).
Bonita Industries has the following costs when producing 100000 units:
Variable costs | $600000 |
Fixed costs | 900000 |
An outside supplier is interested in producing the item for Bonita. If the item is produced outside, Bonita could use the released production facilities to make another item that would generate $230000 of net income. At what unit price would Bonita accept the outside suppliers offer if Bonita wanted to increase net income by $200000?
$5.70
$8.30
$6.30
$10.30
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