Question
Your Company makes 35,000 motors to be used in the production of its sewing machines. The cost per motor at this level of activity is:
Your Company makes 35,000 motors to be used in the production of its sewing machines. The cost per motor at this level of activity is:
Direct materials $4.50
Direct labor $4.60
Variable manufacturing overhead $3.75
Fixed manufacturing overhead $3.40
An outside supplier has offered to supply all the motors the company needs for $15 each. If Your Company decides to buy the motors, there would be no other use for the production facilities and 25% of the fixed manufacturing overhead cost could not be avoided. If Your Company decides to buy the motor, what is the change in net income net operating income?
A. $45,500
B. $ 14,000
C. ($45,500)
D. ($14,000)
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