Ashley Industries can make 1,330 units of a necessary component with the following costs: Direct Materials Direct Labor $146,000 $39,000 Variable Overhead $23,000 Fixed Overhead $? The company can purchase the 1,330 units externally for $287,000. The avoidable fixed costs are $22,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?

Ashley Industries can make 1,330 units of a necessary component with the following costs: Direct Materials Direct Labor $146,000 $39,000 Variable Overhead $23,000 Fixed Overhead $? The company can purchase the 1,330 units externally for $287,000. The avoidable fixed costs are $22,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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What are the fixed overhead costs of making the component

Ashley Industries can make 1,330 units of a necessary component
with the following costs:
Direct Materials
Direct Labor
$146,000
$39,000
Variable Overhead $23,000
Fixed Overhead
$?
The company can purchase the 1,330 units externally for $287,000.
The avoidable fixed costs are $22,000 if the units are purchased
externally. An analysis shows that at this external price, the company
is indifferent between making or buying the part.
What are the fixed overhead costs of making the component?

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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