Shine Engine Company manufacturers Part A which is used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials sh. 40,000 Direct labour 10,000 Variable overhead costs 30,000 Fixed overhead costs 20,000 Total costs 100,000 It is estimated that 10% of the fixed overhead costs assigned to Part A will no longer be incurred if the company purchases Part A from the outside supplier. The company has the option of purchasing the part from an outside supplier at sh. 85 per unit. a) if Shine Engine company accepts the offer from the outside supplier, the monthly avoidable costs will be: Select one: A. sh. 80,000 B. sh. 100,000 C. sh. 82,000 D. sh. 98,000
Shine Engine Company manufacturers Part A which is used in several of its engine models. Monthly production costs for 1,000 units are as follows:
Direct materials sh. 40,000
Direct labour 10,000
Variable
Fixed overhead costs 20,000
Total costs 100,000
It is estimated that 10% of the fixed overhead costs assigned to Part A will no longer be incurred if the company purchases Part A from the outside supplier. The company has the option of purchasing the part from an outside supplier at sh. 85 per unit.
a) if Shine Engine company accepts the offer from the outside supplier, the monthly avoidable costs will be:
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