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The ABC Company makes 40,000 motors to be used in the production of its se machines. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead $5.50 $5.60 $4.75

The ABC Company makes 40,000 motors to be used in the production of its se machines. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead $5.50 $5.60 $4.75

FINANCIAL ACCOUNTING
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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The ABC Company makes 40,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead O ($92,000) $276,000 $178,000 $5.50 $86,000 $5.60 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to ABC Company for this motor is $18. If ABC Company decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: $4.75 $4.45
Transcribed Image Text:The ABC Company makes 40,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead O ($92,000) $276,000 $178,000 $5.50 $86,000 $5.60 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to ABC Company for this motor is $18. If ABC Company decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: $4.75 $4.45
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