AF 211 al 2017 Mictern X n.com/m.tpx G Google -Lenovo Recommend G carnaitysenmey
ID: 2587244 • Letter: A
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AF 211 al 2017 Mictern X n.com/m.tpx G Google -Lenovo Recommend G carnaitysenmey1 Conthars33You GTChemcal Equation& Sapinglewnngled TB MC Qu. 07-108 The Talbot Corporation makes wheels that t... e Tolbot Corporation makes wheels that it uses in the production of bicycles Talbot's costs to produce 250,000 wheels annually are $50000 $75,000 $37,500 $78.000 labor Varieble menufecturning overhead Fxed manufecturing overhead An outside supplier has offered to sell Talbot sam dar wheels for 29 per wheel the wheels are purchased from the outside supplier $33,000 of annual fund facilities now being used could be rented to another company for $87,000 per year Direct labor iso variable cost Itf Talbot chooses to buy the w el from the outside supplier, then annual net operating income would ould be avoided and the O decrease by $4.500 O increase by $50,000 O ncrease by sh00 O increase by $82,500 Multiple Choice ^ Type here to search 2//2017 H8AExplanation / Answer
Answer : D) increase by $82,500
total costs avoided when purchased from outside
= Direct Material + Direct Labour + Variable Manufacturing Overheads
= 50,000+75,000+37,500
=$162,500
Other savings = Reduction in Fixed Cost + Rental Income
= 33,000+87,000
= $120,000
Therefore, total savings = 162,500+120,000
= $282,500
Total cost of purchasing from outside supplier = $0.80*250,000
=$200,000
Therefore, increase in operating income = 282,500-200,000
=$82,500
Increase in operating income =$82,500
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