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The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 190,000 wheels annually are: Direct materials Direct labor $38,000 $57,000 Variable manufacturing overhead $28,500 Fixed manufacturing overhead $67,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $22,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $52,100 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would: a. increase by $64,900 b. increase by $6,500 c. increase by $38,000 d. decrease by $45,600

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 190,000 wheels annually are: Direct materials Direct labor $38,000 $57,000 Variable manufacturing overhead $28,500 Fixed manufacturing overhead $67,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $22,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $52,100 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would: a. increase by $64,900 b. increase by $6,500 c. increase by $38,000 d. decrease by $45,600

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 talbot corporation makes solve this question solution accounting

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 190,000 wheels annually are: Direct materials Direct labor $38,000 $57,000 Variable manufacturing overhead $28,500 Fixed manufacturing overhead $67,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $22,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $52,100 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would: a. increase by $64,900 b. increase by $6,500 c. increase by $38,000 d. decrease by $45,600
Transcribed Image Text:The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 190,000 wheels annually are: Direct materials Direct labor $38,000 $57,000 Variable manufacturing overhead $28,500 Fixed manufacturing overhead $67,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $22,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $52,100 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would: a. increase by $64,900 b. increase by $6,500 c. increase by $38,000 d. decrease by $45,600
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