Answered: what is the recommended decision and…

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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Lights Incorporated calculates cost for an equivalent unit of production using the weighted-average method. Sunshine Company, maker of high-quality eyewear, incurs fixed costs of $24 and variable costs of $48 in making one unit of its matrix line of sunglasses, based on current demand of 100,000 units per year. Sunshine Company's major supplier has offered to make all 100,000 matrix sunglasses for $55 each. If Smith accepts the offer of the supplier, it will save $4 per unit in fixed costs. Based solely on this information, what is the recommended decision and how much will be saved based on this decision?

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