Johnson Company manufactures a part for its production cycle. The annual costs per unit for 10,000 units of the part are as follows: Direct materials Direct labor $20.00 15.00 Variable factory overhead 16.00 Fixed factory overhead Total costs 10.00 $61.00 The fixed factory overhead costs are unavoidable. Spalding Company has offered to sell 10,000 units of the same part to Johnson Company for $60 per unit. The facilities currently used to make the part could be rented out to another manufacturer for $100,000 per year. Johnson Company should: A) buy the part to save $2.50 per unit. B) make the part to save $2.50 per unit. C) buy the part to save $1 per unit. D) make the part to save $1 per unit.
Johnson Company manufactures a part for its production cycle. The annual costs per unit for 10,000 units of the part are as follows: Direct materials Direct labor $20.00 15.00 Variable factory overhead 16.00 Fixed factory overhead Total costs 10.00 $61.00 The fixed factory overhead costs are unavoidable. Spalding Company has offered to sell 10,000 units of the same part to Johnson Company for $60 per unit. The facilities currently used to make the part could be rented out to another manufacturer for $100,000 per year. Johnson Company should: A) buy the part to save $2.50 per unit. B) make the part to save $2.50 per unit. C) buy the part to save $1 per unit. D) make the part to save $1 per unit.
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...
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want answer please
![Johnson Company manufactures a part for its production cycle. The annual costs per unit
for 10,000 units of the part are as follows:
Direct materials
Direct labor
$20.00
15.00
Variable factory overhead 16.00
Fixed factory overhead
Total costs
10.00
$61.00
The fixed factory overhead costs are unavoidable. Spalding Company has offered to sell
10,000 units of the same part to Johnson Company for $60 per unit. The facilities currently
used to make the part could be rented out to another manufacturer for $100,000 per year.
Johnson Company should:
A) buy the part to save $2.50 per unit.
B) make the part to save $2.50 per unit.
C) buy the part to save $1 per unit.
D) make the part to save $1 per unit.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F177ddedb-f8aa-447f-8d9a-c4bb2f248d3c%2F3194aad0-5347-4a1e-9e02-acaf7746e34e%2Fio0ij2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Johnson Company manufactures a part for its production cycle. The annual costs per unit
for 10,000 units of the part are as follows:
Direct materials
Direct labor
$20.00
15.00
Variable factory overhead 16.00
Fixed factory overhead
Total costs
10.00
$61.00
The fixed factory overhead costs are unavoidable. Spalding Company has offered to sell
10,000 units of the same part to Johnson Company for $60 per unit. The facilities currently
used to make the part could be rented out to another manufacturer for $100,000 per year.
Johnson Company should:
A) buy the part to save $2.50 per unit.
B) make the part to save $2.50 per unit.
C) buy the part to save $1 per unit.
D) make the part to save $1 per unit.
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