Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice $78,900 increase. $42,100 increase. $37,900 decrease. $ 129,000 20,500 60,000 80,000 $18,900 decrease.

Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice $78,900 increase. $42,100 increase. $37,900 decrease. $ 129,000 20,500 60,000 80,000 $18,900 decrease.

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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