An outside supplier has offered to sell the company all of these parts it needs for $46.20 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $264,000 per year.
If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $21.90 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.
-What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it?
A) $264,000
B) $(328,000)
C) $548,000
D) $(64,000)
Correct Answer:
Verified
Q112: Dockwiller Inc. manufactures industrial components. One of
Q113: Hadley, Inc. makes a line of bathroom
Q114: Rama Corporation is presently making part J56
Q115: Hadley, Inc. makes a line of bathroom
Q116: Dockwiller Inc. manufactures industrial components. One of
Q118: Hermenegildo Corporation is presently making part P42
Q119: The management of Cackowski Corporation has been
Q120: Rama Corporation is presently making part J56
Q121: The Madison Corporation produces three products with
Q141: Cranston Corporation makes four products in a
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents