Your Company uses a total of 15,000 units of a part that are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $3.75 Direct labor $3.40 Variable manufacturing overhead $8.00 Supervisor’s salary $8.50 Depreciation of special equipment $2.75 Other fixed costs $7.00 An outside supplier has offered to make the part and sell it to the company for $27.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs can be avoided. If the part were purchased instead of produced, $2 of the other fixed costs could be avoided. In addition, the space used to make the part could be used to make more of one of the company's other products, generating an additional segment margin of $30,000 per year for that product. What would be the impact on the company's overall net operating income of buying the part? Group of answer choices Increase by $8,250 per year. Decrease by $27,750 per year. Increase by $30,000 per year. Increase by $2,250 per year. Increase by $88,500 per year.
Your Company uses a total of 15,000 units of a part that are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $3.75 Direct labor $3.40 Variable manufacturing overhead $8.00 Supervisor’s salary $8.50 Depreciation of special equipment $2.75 Other fixed costs $7.00 An outside supplier has offered to make the part and sell it to the company for $27.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs can be avoided. If the part were purchased instead of produced, $2 of the other fixed costs could be avoided. In addition, the space used to make the part could be used to make more of one of the company's other products, generating an additional segment margin of $30,000 per year for that product. What would be the impact on the company's overall net operating income of buying the part? Group of answer choices Increase by $8,250 per year. Decrease by $27,750 per year. Increase by $30,000 per year. Increase by $2,250 per year. Increase by $88,500 per year.
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...
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Your Company uses a total of 15,000 units of a part that are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity:
| Per Unit | |
| Direct materials | $3.75 |
| Direct labor | $3.40 |
| Variable manufacturing |
$8.00 |
| Supervisor’s salary | $8.50 |
| $2.75 | |
| Other fixed costs | $7.00 |
An outside supplier has offered to make the part and sell it to the company for $27.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs can be avoided. If the part were purchased instead of produced, $2 of the other fixed costs could be avoided. In addition, the space used to make the part could be used to make more of one of the company's other products, generating an additional segment margin of $30,000 per year for that product. What would be the impact on the company's overall net operating income of buying the part?
Group of answer choices
Increase by $8,250 per year.
Decrease by $27,750 per year.
Increase by $30,000 per year.
Increase by $2,250 per year.
Increase by $88,500 per year.
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