Smith Manufacturing is considering purchasing components from an outside supplier instead of making them in-house. The supplier would charge $80,000 for 40,000 units. Smith's current production costs for 40,000 units are: Direct material: $35,000 Direct labor: $15,000 Manufacturing overhead: $45,000 Of the manufacturing overhead, $25,000 would be eliminated if Smith stops production, while the remaining overhead would continue regardless. What is the amount of avoidable costs if Smith buys rather than makes the components? A) $45,000 B) $75,000 C) $95,000 D) $80,000

Smith Manufacturing is considering purchasing components from an outside supplier instead of making them in-house. The supplier would charge $80,000 for 40,000 units. Smith's current production costs for 40,000 units are: Direct material: $35,000 Direct labor: $15,000 Manufacturing overhead: $45,000 Of the manufacturing overhead, $25,000 would be eliminated if Smith stops production, while the remaining overhead would continue regardless. What is the amount of avoidable costs if Smith buys rather than makes the components? A) $45,000 B) $75,000 C) $95,000 D) $80,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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