Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,020 remotes is as follows: Cost Direct materials Direct labor Variable overhead $ 65,130 $ 55,110 $30,060 $50,100 $ 200,400 Fixed overhead Total Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? 2. Compute the difference in cost between making and buying the remotes if $20,040 of the fixed costs can be avoided. What is the change in net income? 3. What is the change in net income if fixed cost of $20,040 can be avoided and Frannie could rent out the factory space no longer in use for $20,040?

Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,020 remotes is as follows: Cost Direct materials Direct labor Variable overhead $ 65,130 $ 55,110 $30,060 $50,100 $ 200,400 Fixed overhead Total Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? 2. Compute the difference in cost between making and buying the remotes if $20,040 of the fixed costs can be avoided. What is the change in net income? 3. What is the change in net income if fixed cost of $20,040 can be avoided and Frannie could rent out the factory space no longer in use for $20,040?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...

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