your company uses a total of 20,000 units of a part that are produced and used every year. The company’s accounting department reports the following cost of producing the part at this level of activity(see attached image). and outside supplier has offered to make the part and sell it to the company for $35 each. If this offer is excepted, the supervisors salary and all of the variable costs can be avoided. If the part were purchased instead of produced, three dollars of the other overhead could be avoided. In addition, space used to make the part could be used to make more of one of the company’s other products, Generating an additional segment margin of $15,000 per year for that product. what would be the impact on the companies overall net operating income of buying the part? a) increase by $15,000 per year b) increase by $11,000 per year c) decrease by $4,000 per year d) decrease by $24,000 per year e) decrease by $9,000 per year
your company uses a total of 20,000 units of a part that are produced and used every year. The company’s accounting department reports the following cost of producing the part at this level of activity(see attached image). and outside supplier has offered to make the part and sell it to the company for $35 each. If this offer is excepted, the supervisors salary and all of the variable costs can be avoided. If the part were purchased instead of produced, three dollars of the other overhead could be avoided. In addition, space used to make the part could be used to make more of one of the company’s other products, Generating an additional segment margin of $15,000 per year for that product. what would be the impact on the companies overall net operating income of buying the part? a) increase by $15,000 per year b) increase by $11,000 per year c) decrease by $4,000 per year d) decrease by $24,000 per year e) decrease by $9,000 per year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
your company uses a total of 20,000 units of a part that are produced and used every year. The company’s accounting department reports the following cost of producing the part at this level of activity(see attached image).
and outside supplier has offered to make the part and sell it to the company for $35 each. If this offer is excepted, the supervisors salary and all of the variable costs can be avoided. If the part were purchased instead of produced, three dollars of the other overhead could be avoided. In addition, space used to make the part could be used to make more of one of the company’s other products, Generating an additional segment margin of $15,000 per year for that product. what would be the impact on the companies overall net operating income of buying the part?
a) increase by $15,000 per year
b) increase by $11,000 per year
c) decrease by $4,000 per year
d) decrease by $24,000 per year
e) decrease by $9,000 per year
Transcribed Image Text:Per Unit
Direct materials...
$12.90
Direct labor....
$ 7.50
Variable manufacturing overhead. .
$ 6.00
Supervisor's salary..
$4.40
Depreciation of special equipment .
$1.80
Other fixed costs..
$9.00
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