Main Menu Contents Timer ? Notes Feedback-Print ?Otnf Evaluate Course Contents S

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Main Menu Contents Timer ? Notes Feedback-Print ?Otnf Evaluate Course Contents SECOND CHANCE EXAM 2 Question 4 costs for S4,000 units were: x company considenng buying·part next year that they currently make. A company has offered to s mly this pat for SS.25 per unt. This year's total productio $280,800 264,600 Direct labor [all variable) Total overhead Total production costs $815,400 Of the total overhead costs, $75,600 were fixed, and $46,872 of these fixed overhead costs were unavoldable. If X Company buys the part, the resources that were used for production can be rented out for $80,000. Production next year is expected to increase to 57,900 units If X Company buys the part instead of making , it will save 25,028 Tries 2/3 Provos. The

Explanation / Answer

INCREMENTAL INCOME Savings in cost Cost of buying the part (57900 units @ 15.25) 882,975 Less: Rental icnome from idle capacity 80,000 802,975 Less: Savins in cost Material (57900 units @280800/54000) 301,080 Labour (57900 units @ 264600/54000) 283,710 Variable OH (57900 units @ 194,400/54000) 208,440.00 Fixed OH (75600-46872) 28,728 Net decrease in income -18,983

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