5:31Part E76 is used in one of Ran Corporation'sproducts. The company's Accounting Departmentreports the following costs of producing the 12,000units of the part that are needed every year.PerunitDirect materials.Direct labor.......$4.501.20Variable overhead.Supervisor's salary....Depreciation of special equipment.. 2.30Allocated general overhead...2.703.001.80An outside supplier has offered to make the part andsell it to the company for $16.00 each. If this offer isaccepted, the supervisor's salary and all of thevariable costs, including direct labor, can be avoided.The special equipment used to make the part waspurchased many years ago and has no salvage valueor other use. The allocated general overheadrepresents fixed costs of the entire company. If theoutside supplier's offer were accepted, only $5,000of these allocated general overhead costs would beavoided. In addition, the space used to produce partE43 could be used to make more of one of thecompany's other products, generating an additionalsegment margin of $40,000 per year for thatproduct.Required:a. Prepare a report that shows the effect on thecompany's total net operating income of buying partE43 from the supplier rather than continuing to makeit inside the company.b. Which alternative should the company choose

Name: 5:31Part E76 is used in one of Ran Corporation'sproducts. The company
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Description: 5:31Part E76 is used in one of Ran Corporation'sproducts. The company's Accounting Departmentreports the following costs of producing the 12,000units of the part that are needed every year.PerunitDirect materials.Direct labor.......$4.501.20Variable

The question is based on the concept of cost accounting.

Business

Accounting

Part E76 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per unit Direct materials. Direct labor... Variable overhead... .$4.50 ... 1.20 2.70 Supervisor's salary.. Depreciation of special equipment.. 2.30 Allocated general overhead. 3.00 1.80

Part E76 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per unit Direct materials. Direct labor... Variable overhead... .$4.50 ... 1.20 2.70 Supervisor's salary.. Depreciation of special equipment.. 2.30 Allocated general overhead. 3.00 1.80

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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