ABC Company incurs the following costs in producing 25,000 units of product: Direct materials $175,000 Direct labour 200,000 Variable manufacturing overhead 150,000 Fixed manufacturing overhead 725,000 An outside supplier has offered to supply the 25,000 units at $15.00 each. All of ABC's rela $475,000 of the fixed costs, would be eliminated if the offer is accepted. Acceptance will r

ABC Company incurs the following costs in producing 25,000 units of product: Direct materials $175,000 Direct labour 200,000 Variable manufacturing overhead 150,000 Fixed manufacturing overhead 725,000 An outside supplier has offered to supply the 25,000 units at $15.00 each. All of ABC's rela $475,000 of the fixed costs, would be eliminated if the offer is accepted. Acceptance will r

Name: ABC Company incurs the following costs in producing 25,000 units of p
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Description: ABC Company incurs the following costs in producing 25,000 units of product:Direct materials$175,000Direct labour200,000Variable manufacturing overhead150,000Fixed manufacturing overhead725,000An outside supplier has offered to supply the 25,000 uni

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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Vaughn Manufacturing has the following costs when producing 100000 units: Variable costs $600000 Fixed costs 900000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $167000. The net increase (decrease) in the net income of accepting the supplier's offer is O $317000. O $(17000). O $832000. O $283000.
Tamarisk Manufacturing incurs unit costs of $7.20 ($5.20 variable and $2.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 17,200 of the parts for $5.70 per unit. If it accepts the offer, Tamarisk will save all variable costs and $1.00 of fixed costs. Prepare an analysis showing the total cost savings, if any, that Tamarisk will realize by buying the part. (Round per unit answers to 2 decimal places, eg. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, e.g. (15,000).)
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Concord Corporation can produce 100 units of a necessary component part with the following costs: Direct Materials $24000 Direct Labor 8000 Variable Overhead 25000 Fixed Overhead 8000 If Concord Corporation purchases the component externally, $2000 of the fixed costs can be avoided. What is the maximum amount Concord is willing to pay to purchase the 100 units?
San Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell San Clemente the subcomponent for $2.85 a unit. If San Clemente accepts the offer, by how much will net income increase (decrease)? ($8,850) decrease ($2,850) decrease O $19,950 increase $3,750 increase
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