Session Company uses 5,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $72,000 as follows: Direct materials $18,000 Direct labor $20,000 Variable MOH $10,000 Fixed MOH $24,000 Total costs $72,000 An outside supplier has offered to provide Part Y at a price of $12 per unit. If Session Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Accepting the outside supplier's offer leads to an annual advantage/disadvantage of: Advantage of $4,000 Disadvantage of $4,000 Disadvantage of $12,000 Advantage of $12,000
Session Company uses 5,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $72,000 as follows: Direct materials $18,000 Direct labor $20,000 Variable MOH $10,000 Fixed MOH $24,000 Total costs $72,000 An outside supplier has offered to provide Part Y at a price of $12 per unit. If Session Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Accepting the outside supplier's offer leads to an annual advantage/disadvantage of: Advantage of $4,000 Disadvantage of $4,000 Disadvantage of $12,000 Advantage of $12,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Session Company uses 5,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $72,000 as follows:
|
Direct materials |
$18,000 |
|
Direct labor |
$20,000 |
|
Variable MOH |
$10,000 |
|
Fixed MOH |
$24,000 |
|
Total costs |
$72,000 |
An outside supplier has offered to provide Part Y at a price of $12 per unit. If Session Company stops producing the part internally, one-third of the fixed manufacturing
- Advantage of $4,000
- Disadvantage of $4,000
- Disadvantage of $12,000
- Advantage of $12,000
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