Damon Industries manufactures 16,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials $ 134,000 Direct labor 21,500 Variable manufacturing overhead 61,000 Fixed manufacturing overhead 81,000 An outside supplier has offered to sell the component for $15. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,700. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
Damon Industries manufactures 16,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials $ 134,000 Direct labor 21,500 Variable manufacturing overhead 61,000 Fixed manufacturing overhead 81,000 An outside supplier has offered to sell the component for $15. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,700. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Damon Industries manufactures 16,000 components per year. The
| Direct materials | $ 134,000 |
|---|---|
| Direct labor | 21,500 |
| Variable manufacturing |
61,000 |
| Fixed manufacturing overhead | 81,000 |
An outside supplier has offered to sell the component for $15. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,700. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
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