Midas Industries manufactures 20,000 components per year. The manufacturing cost of componentswas determined as follows:Direct materials 100,000 ,Direct labor 160,000, Variable manufacturing overhead 60,000, Fixedmanufacturing overhead 80,000.An outside supplier has offered to sell the component for 17. If it purchases the component from theoutside supplier, the manufacturing facilities would be unused and could be rented out for 10,000.If Midas purchases the component from the supplier instead of manufacturing it, the effect onincome would be:A. 70,000 increase. B.50,000 decrease. C.10,000 decrease. D.30,000 increase.

The fixed manufacturing overhead remains constant irrespective of units produced during the period.

Answered: Midas Industries manufactures 20,000…

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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