Florida Company is presently making part SUN that is used in one of its products. A total of 17,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials: Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Mutiple Choice Per Unit $ 3.80 $ 3.80 An outside supplier has offered to make and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part SUN from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income? ($6.800) $ 1.10 $ 2.50 $ 1.40 $ 8.60
Florida Company is presently making part SUN that is used in one of its products. A total of 17,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials: Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Mutiple Choice Per Unit $ 3.80 $ 3.80 An outside supplier has offered to make and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part SUN from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income? ($6.800) $ 1.10 $ 2.50 $ 1.40 $ 8.60
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
h
Transcribed Image Text:Multiple Choice
O
O
O
O
($6,800)
($163,200)
$163,200
$6,800
Transcribed Image Text:Florida Company is presently making part SUN that is used in one of its products. A total of 17,000 units of this part are produced and used every year. The
company's Accounting Department reports the following costs of producing the part at this level of activity:
Direct materials
Direct labor
Variable manufacturing overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
Multiple Choice
Per Unit
$ 3.80
$ 3.80
($6,800)
$ 1.10
$ 2.50
An outside supplier has offered to make and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable
costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use.
The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced
internally. If management decides to buy part SUN from the outside supplier rather than to continue making the part, what would be the annual impact on the
company's overall net operating income?
$ 1.40
$ 8.60
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