Damon Industries manufactures 30,000 components per year. The manufacturing costs of the components was determined as follows: Direct materials $ 150,000 Direct labor 170,000 Variable manufacturing overhead 70,000 Fixed manufacturing overhead 90,000 An outside supplier has offered to sell the component for $14. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,000. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: • $19,000 decrease • $41,000 increase $49,000 decrease • $89,000 increase

Damon Industries manufactures 30,000 components per year. The manufacturing costs of the components was determined as follows: Direct materials $ 150,000 Direct labor 170,000 Variable manufacturing overhead 70,000 Fixed manufacturing overhead 90,000 An outside supplier has offered to sell the component for $14. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,000. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: • $19,000 decrease • $41,000 increase $49,000 decrease • $89,000 increase

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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