Kk.84. Post Firetrucks is a large-scale manufacturer of fire trucks for local fire departments. Throughout the years, they haveconsistently manufactured all components for their trucks in-house Recently, they have found a vendor for the chassisof the firetruck that would be willing to sell them the chassis for $8,250. After gathering information from the accountingdepartment, management has found the following with regard to the current cost levels when producing 3,000 trucksDirect Materials $9,000,000Direct Labor$15,000,0004Management has also identified that manufacturing overhead costs incurred over the same period for the production ofthe chassis is represented by the following cost behavior equation: Y = $50X + $5,000,000If the part were to be outsourced, 10% of total fixed manufacturing overhead would be eliminated, and the facilitiesfreed up could be rented out to generate $650,000 in rental income to offset any additional costs from outsourcing theproductAssuming that 3,500 units will need to be produced next year, which of the following statements is incorrect?OA. At a purchase price of $8,250, the cost to make is less than the cost to buyB. At a purchase price of $8,378.57 (rounded), Post would be indifferent between making and outsourcing thechassisOC. The total cost to make the part in-house next year is $33,175,000OD. In addition to the quantitative aspects of the analysis, Post should also consider the qualitative aspects inorder to make sure that outsourcing the chassis makes sense for the company's strategy.OE. If Post decides to outsource the production of the chassis, operating income will increase by $450,000

Statement A is correct as the cost to make at $ 8050 is less than the cost to buy. 3000 trucks…

ctured all components for their trucks in-house Recently, they have found a vendor for the ci hout the years, they would be willing to sell them the chassis for $8,250 After gathering information from the acco ement has found the following with regard to the current cost levels when producing 3,000 trum 000,000 $15.000.000

ctured all components for their trucks in-house Recently, they have found a vendor for the ci hout the years, they would be willing to sell them the chassis for $8,250 After gathering information from the acco ement has found the following with regard to the current cost levels when producing 3,000 trum 000,000 $15.000.000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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