........................................................................................... 80   Variable manufacturing overhead...................................................................................................... 48   Fixed manufacturing overhead..........................

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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. La Salle, Inc. makes 1,000 units per year of a part called a widget for use in one of its products. Per the cost accounting department, the cost to make one widget is as follows:

           

 

Direct materials......................................................................................................

$342

 

Direct labor......................................................................................................

80

 

Variable manufacturing overhead......................................................................................................

48

 

Fixed manufacturing overhead......................................................................................................

  520

 

Total manufacturing cost per unit......................................................................................................

$990

           

            An outside supplier has offered to sell La Salle, Inc. all of the widgets it requires.  All of the fixed manufacturing overhead costs will continue even if the widgets are purchased from the outside supplier.

           

           Required:

Assume La Salle, Inc. has no alternative use for the facilities presently devoted to production of the widgets. If the outside supplier offers to sell the widgets to La Salle, Inc. for $850 each, should La Salle, Inc. accept the offer?   Fully support your answer with appropriate calculations.

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