Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,040remotes is as follows:CostDirect materials65, 26055, 220$Direct laborVariable overhead30,120$Fixed overhead50, 200$ 200,800TotalFrannie 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 thechange in net income?2. Compute the difference in cost between making and buying the remotes if $20,080 of the fixed costs can be avoided. What is thechange in net income?3. What is the change in net income if fixed cost of $20,080 can be avoided and Frannie could rent out the factory space no longer inuse for $20,080?

Hence, the change in income when fixed cost is unavoidable is $30,120. There is a decrease in income…

Answered: Frannie Fans currently manufactures…

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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