The Inland Corporation manufactures 1,000 motors that are used in the production of its go-karts.Inland has been approached by an outside supplier that will sell the motor to Inland for $39 each.Inland's cost to manufacture each motor are as follows:

$\begin{array}{lr}
\text { Direct material } & \$ 25 \
\text { Direct labor } & \$ 8 \
\text { Variable overhead } & \$ 4 \
\text { Fixed overhead } & \underline{\$ 6} \
\text { Total } & \underline{\underline{\$ 43}}
\end{array}$
All fixed overhead is unavoidable,and is allocated based on machine hours.The facilities that are used to manufacture the motors have no alternative uses.

a.Should Inland continue to manufacture the motors?
b.Would your ans change if Inland could lease the facilities previously used to produce the motors for $4,800 per year?

Question

The Inland Corporation manufactures 1,000 motors that are used in the production of its go-karts.Inland has been approached by an outside supplier that will sell the motor to Inland for $39 each.Inland's cost to manufacture each motor are as follows:

$\begin{array}{lr}
\text { Direct material } & \$ 25 \
\text { Direct labor } & \$ 8 \
\text { Variable overhead } & \$ 4 \
\text { Fixed overhead } & \underline{\$ 6} \
\text { Total } & \underline{\underline{\$ 43}}
\end{array}$ 
All fixed overhead is unavoidable,and is allocated based on machine hours.The facilities that are used to manufacture the motors have no alternative uses.

a.Should Inland continue to manufacture the motors?
b.Would your ans change if Inland could lease the facilities previously used to produce the motors for $4,800 per year?

Quizplus · Accepted Answer

The Answer of The Inland Corporation manufactures 1,000 motors that are used in the production of its go-karts.Inland has been approached by an outside supplier that will sell the motor to Inland for $39 each.Inland's cost to manufacture each motor are as follows:

$\begin{array}{lr}
\text { Direct material } & \$ 25 \
\text { Direct labor } & \$ 8 \
\text { Variable overhead } & \$ 4 \
\text { Fixed overhead } & \underline{\$ 6} \
\text { Total } & \underline{\underline{\$ 43}}
\end{array}$ 
All fixed overhead is unavoidable,and is allocated based on machine hours.The facilities that are used to manufacture the motors have no alternative uses.

a.Should Inland continue to manufacture the motors?
b.Would your ans change if Inland could lease the facilities previously used to produce the motors for $4,800 per year?

The Inland Corporation Manufactures 1,000 Motors That Are Used in the Production