Question
Your company makes 10,000 units of Part 217 each year. Accounting reports the following costs of producing this part at this level of activity: Per
Your company makes 10,000 units of Part 217 each year. Accounting reports the following costs of producing this part at this level of activity: Per Unit Direct Material $7.00 Direct Labor $6.00 Variable manufacturing overhead $8.00 Supervisor's salary $7.60 Depreciation of equipment $5.90 Allocated general overhead $3.30 An outside supplier has offered to produce this part for $30.00 each. If this offer is accepted, $50,000 of the supervisor's salary, all direct and variable costs can be avoided. The equipment has no salvage value. How much would be net operating income be changed if the outside supplier offer was accepted?
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