Figure 12-3 $\begin{array}{ll}
\text { Direct materials } & \$ 0.23 \
\text { Direct labor } & \$ 0.20 \
\text { Variable overhead } & \$ 0.95 \
\text { Fixed overhead } & \$ 1.32 \
\text { Total } & \$ 2.70
\end{array}$ Quinn has capacity to make 950,000 zippers per year, but due to a soft market, only plans to produce and sell 620,000 zippers next year. LeatherStuff currently buys zippers from an outside supplier for $3.50 each (the same price that Style receives).
-Refer to Figure 12-4. Assume that Style and LeatherStuff have agreed on a transfer price of $3.25. What are the total cost savings for LeatherStuff?
A) $22,500
B) $315,000
C) $292,500
D) $69,000
E) $81,000

Question

Quizplus · Accepted Answer

The total cost savings for LeatherStuff is $22,500. This is calculated as follows:Total cost of zippers from outside supplier = 620,000 x $3.50 = $2,170,000Total cost of zippers from Style = 620,000 x $3.25 = $2,015,000Total cost savings = $2,170,000 - $2,015,000 = $155,000

Figure 12-3 Quinn Has Capacity to Make 950,000 Zippers Per Year, but \\\text

Figure 12-3 Quinn Has Capacity to Make 950,000 Zippers Per Year, but \\
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