The SP Corporation makes 36,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadAn outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $23.95. If SP Corporation decides not to make themotors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage(disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:Multiple Choice($68,400)$214,20090,000$9.50$8.50$3.45$4.40$158,400

Solution : Financial advantage or disadvantage from making is based on the difference of relevant…

-irect materials -irect labor ariable manufacturing overhead ixed manufacturing overhead $9.50 $8.50 $ 3.45 $ 4.40 outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporatio tors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct lab kring the motore rather tha ther from the ou uld be:

-irect materials -irect labor ariable manufacturing overhead ixed manufacturing overhead $9.50 $8.50 $ 3.45 $ 4.40 outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporatio tors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct lab kring the motore rather tha ther from the ou uld be:

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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