RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 15,000 Per Year $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?
RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 15,000 Per Year $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1PB: Classify costs Cromwell Furniture Company manufactures sofas for distribution to several major...
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step by step please. parts a-b
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