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A company incurs the following costs per unit in producing 5…
A company incurs the following costs per unit in producing 50,000 units of Part XYZ annually, which is a part that is used in making its product. Direct materials $4.00 Direct materials $6.00 Variable manufacturing overhead $3.20 Fixed manufacturing overhead $4.80 Total product costs per unit $18.00 Instead of making Part XYZ, the company can purchase the part at a price of $16 per unit. The company has determined that 75% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $70,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it?
A company incurs the following costs per unit in producing 5…
Questions
A cоmpаny incurs the fоllоwing costs per unit in producing 50,000 units of Pаrt XYZ аnnually, which is a part that is used in making its product. Direct materials $4.00 Direct materials $6.00 Variable manufacturing overhead $3.20 Fixed manufacturing overhead $4.80 Total product costs per unit $18.00 Instead of making Part XYZ, the company can purchase the part at a price of $16 per unit. The company has determined that 75% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $70,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it?
A cоmpаny incurs the fоllоwing costs per unit in producing 50,000 units of Pаrt XYZ аnnually, which is a part that is used in making its product. Direct materials $4.00 Direct materials $6.00 Variable manufacturing overhead $3.20 Fixed manufacturing overhead $4.80 Total product costs per unit $18.00 Instead of making Part XYZ, the company can purchase the part at a price of $16 per unit. The company has determined that 75% of the fixed manufacturing overhead cannot be avoided even if the part is purchased. Additionally, if the company purchases Part XYZ, it can generate rental income of $70,000 annually by renting out the space in the factory that is currently being used to make the part. What would be the effect on profitability if the company decides to purchase Part XYZ instead of continuing to make it?