Question

Switzer Corporation makes motorcycle engines. The company’s records show the following unit costs to manufacture part #61645:
Direct materials ......... $12
Direct labor ......... $15
Variable overhead ........ $20
Fixed overhead ......... $10
Another manufacturer has offered to supply Switzer Corporation with part #61645 for a cost of $50 per unit. Switzer uses 1,000 units annually.

Required
If Switzer accepts the offer, what will be the short-run impact on income?



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  • CreatedMarch 11, 2015
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