Oriole Company incurs the following costs to produce 10200 units of a subcomponent: Direct materials $8568 Direct labor 11526 Variable overhead 12852 Fixed overhead 16200 An outside supplier has offered to sell Oriole the subcomponent for $2.85 a unit. No fixed overhead costs are avoidable. If Oriole accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3600. The increase (decrease) in net income from accepting the offer would be $(276). $7476. $276. $(3600).
Oriole Company incurs the following costs to produce 10200 units of a subcomponent: Direct materials $8568 Direct labor 11526 Variable overhead 12852 Fixed overhead 16200 An outside supplier has offered to sell Oriole the subcomponent for $2.85 a unit. No fixed overhead costs are avoidable. If Oriole accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3600. The increase (decrease) in net income from accepting the offer would be $(276). $7476. $276. $(3600).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Oriole Company incurs the following costs to produce 10200 units of a subcomponent:
| Direct materials | $8568 |
| Direct labor | 11526 |
| Variable |
12852 |
| Fixed overhead | 16200 |
An outside supplier has offered to sell Oriole the subcomponent for $2.85 a unit. No fixed overhead costs are avoidable.
If Oriole accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3600. The increase (decrease) in net income from accepting the offer would be
$(276).
$7476.
$276.
$(3600).
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