11. Ford Motor Company produces a lithium battery for its cars that has the following costs per unit: Direct material Direct labor Variable overhead Fixed overhead Total $9 3 $19 Tesla can provide the lithium battery to Ford for $20 per unit. Ford has determined that 80 percent of its fixed overhead would NOT continue if it purchased the battery. However, if Ford no longer produces batteries, it will rent its battery factory. Ford currently produces 8,000. batteries per year. What is the minimum amount of rent income Ford would earn from renting its battery factory to be indifferent between making or buying (namely, the total relevant costs of making the battery is equal to the total relevant costs of buying the battery)?

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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11. Ford Motor Company produces a lithium battery for its cars that has the following costs per
unit:
Direct material.
Direct labor
Variable overhead
Fixed overhead
Total
$9
a. $18,000
b. $17,000
c. $16,000
d. $15,000
2
S
$19
Tesla can provide the lithium battery to Ford for $20 per unit. Ford has determined that 80
percent of its fixed overhead would NOT continue if it purchased the battery. However, if Ford
no longer produces batteries, it will rent its battery factory. Ford currently produces 8,000.
batteries per year. What is the minimum amount of rent income Ford would earn from renting its
battery factory to be indifferent between making or buying (namely, the total relevant costs of
making the battery is equal to the total relevant costs of buying the battery)?
Transcribed Image Text:View 200m Add Page 11. Ford Motor Company produces a lithium battery for its cars that has the following costs per unit: Direct material. Direct labor Variable overhead Fixed overhead Total $9 a. $18,000 b. $17,000 c. $16,000 d. $15,000 2 S $19 Tesla can provide the lithium battery to Ford for $20 per unit. Ford has determined that 80 percent of its fixed overhead would NOT continue if it purchased the battery. However, if Ford no longer produces batteries, it will rent its battery factory. Ford currently produces 8,000. batteries per year. What is the minimum amount of rent income Ford would earn from renting its battery factory to be indifferent between making or buying (namely, the total relevant costs of making the battery is equal to the total relevant costs of buying the battery)?
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