Houston Corporation manufacturers a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$32\
\text { Direct labour } & 40 \
\text { Variable overhead } & 16 \
\text { Fixed overhead } & 32 \
\text { Total } & \$120\

\end{array}$$ Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit.If Houston Corporation accepts Johnson Company's offer,total fixed costs will be reduced to $60,000.What alternative is more desirable and by what amount is it more desirable?
$\begin{array}{lll}& \text { Alternative}&
\text { Amount}\\end{array}$

Question

Houston Corporation manufacturers a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$32\
\text { Direct labour } & 40 \
\text { Variable overhead } & 16 \
\text { Fixed overhead } & 32 \
\text { Total } & \$120\

\end{array}$$ Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit.If Houston Corporation accepts Johnson Company's offer,total fixed costs will be reduced to $60,000.What alternative is more desirable and by what amount is it more desirable?
$\begin{array}{lll}& \text { Alternative}&
 \text { Amount}\\end{array}$

Quizplus · Accepted Answer

The Answer of Houston Corporation manufacturers a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$32\
\text { Direct labour } & 40 \
\text { Variable overhead } & 16 \
\text { Fixed overhead } & 32 \
\text { Total } & \$120\

\end{array}$$ Johnson Company has offered to sell Houston Corporation 5,000 units of the part for $112 per unit.If Houston Corporation accepts Johnson Company's offer,total fixed costs will be reduced to $60,000.What alternative is more desirable and by what amount is it more desirable?
$\begin{array}{lll}& \text { Alternative}&
 \text { Amount}\\end{array}$

Houston Corporation Manufacturers a Part for Its Production Cycle Johnson Company Has Offered to Sell Houston Corporation 5,000 Units