GGT Industries manufactures 23,000 units of a particular component eachyear. The component's annual manufacturing costs for this level of productionare:Direct Materials$147,000Direct Labor$179,000Variable manufacturing$26,000overheadFixed manufacturing$72,000overheadAn outside supplier has offered to produce all 23,000 units of the componentfor $13 per unit. Additional information:。 GGT could earn $42,000 per year by renting out its current manufacturingfacilities if it purchases the component from the outside supplier.。 GGT has determined that the fixed manufacturing overhead would bereduced by 70% if they purchase the component from the supplier.Calculate GGT's anticipated total annual financial impact from purchasingthe component from the supplier instead of manufacturing it themselves.

Variable costs are those costs which changes along with change in activity level. Fixed costs do not…

Answered: GGT Industries manufactures 23,000…

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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Santana Rey expects sales of Business Solutions’ line of computer workstation furniture to equal 300 workstations (at a sales price of $3,700 each) for 2021. The workstations’ manufacturing costs include the following. Direct materials $ 760 per unit Direct labor $ 300 per unit Variable overhead $ 60 per unit Fixed overhead $ 14,400 per year Selling and administrative expenses for these workstations follow. Variable $ 35 per unit Fixed $ 3,500 per year Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are…

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