**Cost Analysis for Vaughn Manufacturing**When producing 100,000 units, Vaughn Manufacturing incurs the following costs:- **Variable Costs**: $600,000- **Fixed Costs**: $900,000An outside supplier has proposed to manufacture the item at a rate of $4.50 per unit. If Vaughn accepts this proposal, the company's current production facilities could be leased to another company for $167,000. The calculation required is to determine the net increase (or decrease) in net income if the supplier's offer is accepted.Possible answers for the net change in net income are:- $317,000- $(17,000)- $832,000- $283,000**Detailed Explanation of Costs and Benefits:**1. **Internal Production Cost**: - Total Variable Costs: $600,000 - Fixed Costs: $900,000 - Total Cost for 100,000 units: $1,500,0002. **Cost if Outsourced**: - Cost per unit: $4.50 - Total Cost for 100,000 units: $4.50 * 100,000 = $450,000 - Lease Revenue: $167,000 - Total Outside Cost: $450,000 - $167,000 = $283,0003. **Change in Net Income**: - Difference between internal production cost and outside cost: $1,500,000 - $283,000 = $1,217,000By calculating these figures, Vaughn Manufacturing can determine the financial impact of whether or not to accept the supplier's offer and lease the facilities.

Manufacturing costs are the cost paid during the manufacturing of a good.Direct material, direct…

Vaughn Manufacturing has the following costs when producing 100000 units: Variable costs $600000 Fixed costs 900000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $167000. The net increase (decrease) in the net income of accepting the supplier's offer is O $317000. O $(17000). O $832000. O $283000.

Vaughn Manufacturing has the following costs when producing 100000 units: Variable costs $600000 Fixed costs 900000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $167000. The net increase (decrease) in the net income of accepting the supplier's offer is O $317000. O $(17000). O $832000. O $283000.

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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