Sunshade produces a special canvas top for its high quality aluminum gazebo. The costs to produce the 900 units needed eachyear are as follows:Treated canvas fabric$144,000Aluminum poles36,000Aluminum frame fittings9,000Direct labor72,000Variable manufacturing overhead22,500Fixed manufacturing overhead58,500$342,000Total costsCoolaroo has offered to make the needed canvas tops of comparable quality for $293 each, FOB shipping point. Sunshadewould pay for shipping at a cost of $50 per unit. Sunshade's accountant has estimated that 20% of the fixed overhead can beavoided if the tops are purchased.Sunshade should:Select one:a. Buy the part, thereby saving $3 per unit.b. Buy the part, thereby saving $10 per unit.c. Make the part, thereby saving $15 per unit.d. Buy the part, thereby saving $5 per unit.

option (c) Make the part thereby saving $15 per unit is correct. Per unit cost in the making is less…

Answered: Sunshade produces a special canvas top…

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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