The SP Corporation 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 $5.50 $5.60 $4.75 $4.45 Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $18. If SP Corporation 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. Direct labor is a variable cost in this company. 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: $276,000 $86,000 ($92,000) $178,000

The SP Corporation 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 $5.50 $5.60 $4.75 $4.45 Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $18. If SP Corporation 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. Direct labor is a variable cost in this company. 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: $276,000 $86,000 ($92,000) $178,000

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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