Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:     Per unit Direct materials   $ 27.00 Direct labor     26.00 Variable manufacturing overhead     23.00 Fixed manufacturing overhead     10.00 Total unit cost   $ 86.00   An outside supplier has offered to provide Cotton Corp. with the 10,000 subcomponents at an $99.00 per unit price. Fixed overhead is not avoidable. What is the maximum price Cotton Corp. should pay the outside supplier?   Multiple Choice   $37.00   $86.00   $99.00   $76.00

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 14EA: Cool Pool has these costs associated with production of 20,000 units of accessory products: direct...
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Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:
 

  Per unit
Direct materials   $

27.00

Direct labor    

26.00

Variable manufacturing overhead    

23.00

Fixed manufacturing overhead    

10.00

Total unit cost   $

86.00

 


An outside supplier has offered to provide Cotton Corp. with the 10,000 subcomponents at an $99.00 per unit price. Fixed overhead is not avoidable. What is the maximum price Cotton Corp. should pay the outside supplier?

 

Multiple Choice

  •  

    $37.00

  •  

    $86.00

  •  

    $99.00

  •  

    $76.00

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