ABC Company produces a part that is used in the manufacture of one of its products. The annual costs associated with the
Posted: Thu May 19, 2022 11:14 am
ABC Company produces a part that is used in the manufacture of
one of its products. The annual costs associated with the
production of 5,000 units of this part are as follows: Direct
materials $100,000 Direct labor 56,000 Variable factory overhead
72,000 Fixed factory overhead 168,000 Total costs $396,000 Of the
fixed factory overhead costs, $72,000 are avoidable. Another
company has offered to sell 5,000 units of the same part to ABC for
$70.00 per unit. The facilities currently used to make the part can
be rented out to another manufacturer for $72,000 per year. What
should ABC Company do? Select one: a. Buy the part and rent the
facilities to save $22,000. b. Make the part to save $22,000. c.
Make the part to save $50,000. d. Buy the part and rent the
facilities to save $72,000.
one of its products. The annual costs associated with the
production of 5,000 units of this part are as follows: Direct
materials $100,000 Direct labor 56,000 Variable factory overhead
72,000 Fixed factory overhead 168,000 Total costs $396,000 Of the
fixed factory overhead costs, $72,000 are avoidable. Another
company has offered to sell 5,000 units of the same part to ABC for
$70.00 per unit. The facilities currently used to make the part can
be rented out to another manufacturer for $72,000 per year. What
should ABC Company do? Select one: a. Buy the part and rent the
facilities to save $22,000. b. Make the part to save $22,000. c.
Make the part to save $50,000. d. Buy the part and rent the
facilities to save $72,000.