Z Inc. manufactures a component Zeta which it uses in production of its main product. Themanufacturing costs per unit of Zeta are as follows:ItemCost per unitDirect materialDirect laborVariable manufacturing overheadFixed manufacturing overhead3.504.502.502.00Annual requirement of Zeta is 8,000 units. Fixed manufacturing overhead is allocated toZeta based on machine-hours used in its production and cannot be avoided if production ofZeta is stopped.An outside supplier has offered Z Inc. to supply 8,000 units at a total cost of $96,000. If ZInc. purchases the component Zeta from the outside supplier, how will it affect its operatingincome?a. Operating income will increase by $4,000b. Operating income will decrease by $4,000c. Operating income will increase by $6,000d. Operating income will decrease by $12,000

The income which is earned directly from the regular business operation is known as operating…

Answered: An outside supplier has offered Z Inc.…

An outside supplier has offered Z Inc. to supply 8,000 units at a total cost of $96,000. If Z Inc. purchases the component Zeta from the outside supplier, how will it affect its operating

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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