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20 02 Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,900 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $ 1.80 $ 2.80 $ 5.60 $ 6.10 $ 7.20 $ 4.30 An outside supplier has offered to make the part and sell it to the company for $22.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,900 of these allocated general overhead costs would be avoided. Required: a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company. b. Which alternative should the company choose?

20 02 Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,900 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $ 1.80 $ 2.80 $ 5.60 $ 6.10 $ 7.20 $ 4.30 An outside supplier has offered to make the part and sell it to the company for $22.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,900 of these allocated general overhead costs would be avoided. Required: a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company. b. Which alternative should the company choose?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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20 02 Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,900 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $ 1.80 $ 2.80 $ 5.60 $ 6.10 $ 7.20 $ 4.30 An outside supplier has offered to make the part and sell it to the company for $22.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,900 of these allocated general overhead costs would be avoided. Required: a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company. b. Which alternative should the company choose?
Transcribed Image Text:20 02 Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,900 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $ 1.80 $ 2.80 $ 5.60 $ 6.10 $ 7.20 $ 4.30 An outside supplier has offered to make the part and sell it to the company for $22.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,900 of these allocated general overhead costs would be avoided. Required: a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company. b. Which alternative should the company choose?
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