Dull Corporation produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows: Variable production cost $ 16 Fixed production cost 20 Unit product cost $ 36 The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
Dull Corporation produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows: Variable production cost $ 16 Fixed production cost 20 Unit product cost $ 36 The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...
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Dull Corporation produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows:
|
Variable production cost |
$ |
16 |
|
|
Fixed production cost |
|
20 |
|
|
Unit product cost |
$ |
36 |
|
The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
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