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The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 170,000 wheels annually are: $34,000 Direct materlals $51,000
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 170,000 wheels annually are: $34,000 Direct materlals $51,000 DIrect labon Varlable manufacturing overhead Flxed manufacturing overhead $25.500 $65,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $20,000 of annual fixed overhead could be avoided and the facilities now If Talbot chogses to buy the wheel from the ou itside supplier then annual net operating income would: increase by $44,2O0 increase by $55.300 decrease by $5,500 increase by $34,000 O O O
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