Question

Jeff Company produces a part that is used in the manufacture of one of its products. The annual costs associated with the production of 11,000 units of this part are as follows:
Direct materials ............ $ 25,000
Direct labor ............. 34,000
Indirect production costs variable ..... 65,000
Indirect production costs fixed ...... 40,000
Total costs .............. $164,000
A supplier is willing to sell 11,000 units of the part to Jeff Company for $12.50 per unit. When examining the indirect production costs fixed, Jeff Company determines $10,000 is avoidable.

Required:
If there are no alternative uses for the facilities, should Jeff Company take advantage of the supplier's?



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  • CreatedAugust 26, 2013
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