Case 1: A supplier offered to sell the company this component at $4 per unit. If the
Question:
Case 1: A supplier offered to sell the company this component at $4 per unit. If the company purchases the component, 30% of the fixed costs can be eliminated.
What is the total cost to make the components? *
$25,000
$36,000
$45,000
None of the above
What is the amount of avoidable fixed costs? *
$2,700
$6,300
$9,000
None of the above
What is the total cost to buy the components? *
$60,000
$66,300
$62,700
None of the above
What is the correct make-or-buy decision? *
Buy and save $20,400
Make and save $15,000
Make and save $21,300
None of the above
Case 2: Refer to case 1 and assume that through buying the components, Mira Company can use the released productive capacity to generate additional income of $22,000 from producing another product.
What is the total cost to make the components? *
$45,000
$67,000
$23,000
None of the above
The net increase (decrease) in the net income of accepting the supplier’s offer is: *
$700
$(700)
$7,000
None of the above
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III