Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,020 remotes is as follows: Cost Direct materials Direct labor Variable overhead $ 65,130 $ 55,110 $30,060 $50,100 $ 200,400 Fixed overhead Total Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? 2. Compute the difference in cost between making and buying the remotes if $20,040 of the fixed costs can be avoided. What is the change in net income? 3. What is the change in net income if fixed cost of $20,040 can be avoided and Frannie could rent out the factory space no longer in use for $20,040?

Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,020 remotes is as follows: Cost Direct materials Direct labor Variable overhead $ 65,130 $ 55,110 $30,060 $50,100 $ 200,400 Fixed overhead Total Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? 2. Compute the difference in cost between making and buying the remotes if $20,040 of the fixed costs can be avoided. What is the change in net income? 3. What is the change in net income if fixed cost of $20,040 can be avoided and Frannie could rent out the factory space no longer in use for $20,040?

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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