Wildhorse Company must decide whether to make or buy some of its components. The costs of producing 67,200 switches for its generators are as follows. Direct materials Direct labor $30,200 $38,252 Variable overhead Fixed overhead $45,900 $81,200 Instead of making the switches at an average cost of $2.91 ($195,552 ÷ 67,200), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

Wildhorse Company must decide whether to make or buy some of its components. The costs of producing 67,200 switches for its generators are as follows. Direct materials Direct labor $30,200 $38,252 Variable overhead Fixed overhead $45,900 $81,200 Instead of making the switches at an average cost of $2.91 ($195,552 ÷ 67,200), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

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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