Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the motor used to power the scooter, but is considering buying the motor from an outside supplier. The manufacturing costs for Riders to make 20,000 motors are as follows: Cost per motor Direct material $28.50 Direct labor $13.25 Overhead $18.00 An outside supplier offers to supply Riders with all the motors it needs at $55.00 per unit. If Riders buys the motors from the supplier, it will still incur 80% of its overhead costs. Based on the above information, the financial advantage (disadvantage) of buying the 20,000 motors from the outside supplier is: a. ($265,000) b. None of the other answers are correct c. $95,000 d. ($193,000) e. $23,000
Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the motor used to power the scooter, but is considering buying the motor from an outside supplier. The
|
|
Cost per motor |
|
Direct material |
$28.50 |
|
Direct labor |
$13.25 |
|
|
$18.00 |
An outside supplier offers to supply Riders with all the motors it needs at $55.00 per unit. If Riders buys the motors from the supplier, it will still incur 80% of its overhead costs. Based on the above information, the financial advantage (disadvantage) of buying the 20,000 motors from the outside supplier is:
| a. |
($265,000) |
|
| b. |
None of the other answers are correct |
|
| c. |
$95,000 |
|
| d. |
($193,000) |
|
| e. |
$23,000 |
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