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Question 12 A company incurs the following costs per kin producing 25.000 XVZ which is a part that is used in thisling its Braue Direct materials $3.00 Direct labor $4.00 Variable manufacturing overhead $2.80 Fixed manufacturing overhead $3.40 Total product costs per unit $13.00 Instead of making Part XYZ, the company can purchase the part at a price of $12 per unit. The company has determined that 70% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $40,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it? Increase in profitability of $85,000 Increase in profitability of $39,100 Increase in profitability of $23,800 Decrease in profitability of $22,100 None of the above

Question 12 A company incurs the following costs per kin producing 25.000 XVZ which is a part that is used in thisling its Braue Direct materials $3.00 Direct labor $4.00 Variable manufacturing overhead $2.80 Fixed manufacturing overhead $3.40 Total product costs per unit $13.00 Instead of making Part XYZ, the company can purchase the part at a price of $12 per unit. The company has determined that 70% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $40,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it? Increase in profitability of $85,000 Increase in profitability of $39,100 Increase in profitability of $23,800 Decrease in profitability of $22,100 None of the above

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter5: Process Costing
Section: Chapter Questions
Problem 8MC: What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials,...
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Question 12 A company incurs the following costs per kin producing 25.000 XVZ which is a part that is used in thisling its Braue Direct materials $3.00 Direct labor $4.00 Variable manufacturing overhead $2.80 Fixed manufacturing overhead $3.40 Total product costs per unit $13.00 Instead of making Part XYZ, the company can purchase the part at a price of $12 per unit. The company has determined that 70% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $40,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it? Increase in profitability of $85,000 Increase in profitability of $39,100 Increase in profitability of $23,800 Decrease in profitability of $22,100 None of the above
Transcribed Image Text:Question 12 A company incurs the following costs per kin producing 25.000 XVZ which is a part that is used in thisling its Braue Direct materials $3.00 Direct labor $4.00 Variable manufacturing overhead $2.80 Fixed manufacturing overhead $3.40 Total product costs per unit $13.00 Instead of making Part XYZ, the company can purchase the part at a price of $12 per unit. The company has determined that 70% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $40,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it? Increase in profitability of $85,000 Increase in profitability of $39,100 Increase in profitability of $23,800 Decrease in profitability of $22,100 None of the above
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