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Pueblo Production Company Manufactures 50,000 High-Definition Televisions Each Year Should Pueblo Purchase or Produce the Screens,and What Is the Considering

Question 113

Multiple Choice

Pueblo Production Company manufactures 50,000 high-definition televisions each year.Pueblo is considering purchasing the glass screens from an outside source rather than producing them internally.The following data relate to the glass screens:
 Cost per screen from outside supplier $32.50 Internal costs per screen    Direct materials $17.50   Direct labor $8.25   Variable overhead $2.60 Total fixed overhead $67,000 Avoidable fixed overhead $50,400\begin{array}{|l|r|}\hline \text { Cost per screen from outside supplier } & \$ 32.50 \\\hline \text { Internal costs per screen } & \\\hline \text { ~~Direct materials } & \$ 17.50 \\\hline \text { ~~Direct labor } & \$ 8.25 \\\hline \text { ~~Variable overhead } & \$ 2.60 \\\hline \text { Total fixed overhead } & \$ 67,000 \\\hline \text { Avoidable fixed overhead } & \$ 50,400 \\\hline\end{array} Should Pueblo purchase or produce the screens,and what is the savings associated with the decision?


A) Purchase the screens and save $157,100
B) Produce the screens and save $157,100
C) Produce the screens and save $207,500
D) Purchase the screens and save $207,500

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