47:08 Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 7,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Per Unit $ 3.50 $ 4.50 $ 1.90 $ 5.50 $ 5.50 $ 6.00 Allocated general overhead An outside supplier has offered to produce and sell the part to the company for $25.10 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, none of which would be avoided if the part were purchased instead of produced internally. In addition to the facts given above, assume that the space used to produce part U98 could be used to make more of one of the company's other products, generating an additional segment margin of $23,200 per year for that product. What would be the financial advantage (disadvantage) of buying part U98 from the outside supplier and using the freed space to make more of the other product? Multiple Choice ($44,700) О ($54,700) O $23,200
47:08 Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 7,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Per Unit $ 3.50 $ 4.50 $ 1.90 $ 5.50 $ 5.50 $ 6.00 Allocated general overhead An outside supplier has offered to produce and sell the part to the company for $25.10 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, none of which would be avoided if the part were purchased instead of produced internally. In addition to the facts given above, assume that the space used to produce part U98 could be used to make more of one of the company's other products, generating an additional segment margin of $23,200 per year for that product. What would be the financial advantage (disadvantage) of buying part U98 from the outside supplier and using the freed space to make more of the other product? Multiple Choice ($44,700) О ($54,700) O $23,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
None
Transcribed Image Text:47:08
Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 7,000 units of this part are produced and used every year. The
company's Accounting Department reports the following costs of producing the part at this level of activity:
Direct materials
Direct labor
Variable overhead
Supervisor's salary
Depreciation of special equipment
Per Unit
$ 3.50
$ 4.50
$ 1.90
$ 5.50
$ 5.50
$ 6.00
Allocated general overhead
An outside supplier has offered to produce and sell the part to the company for $25.10 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, none of which would be avoided if the part were purchased instead of produced
internally.
In addition to the facts given above, assume that the space used to produce part U98 could be used to make more of one of the company's other products,
generating an additional segment margin of $23,200 per year for that product. What would be the financial advantage (disadvantage) of buying part U98 from the
outside supplier and using the freed space to make more of the other product?
Multiple Choice
($44,700)
О
($54,700)
O
$23,200
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education