Fair Engineering Company manufactures part QE767 used in several of its engine models. Monthly production costs for 10,000 units are as follows:
It is estimated that 20% of the fixed support costs assigned to part QE767 will no longer be incurred if the company purchases the part from the outside supplier. Fair Engineering Company has the option of purchasing the part from an outside supplier at $16 per unit.
-If Fair Engineering Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred)total:
A)$ 32,000.
B)$ 82,000.
C)$ 158,000.
D)$190,000.

Question

Fair Engineering Company manufactures part QE767 used in several of its engine models. Monthly production costs for 10,000 units are as follows:
 It is estimated that 20% of the fixed support costs assigned to part QE767 will no longer be incurred if the company purchases the part from the outside supplier. Fair Engineering Company has the option of purchasing the part from an outside supplier at $16 per unit.
-If Fair Engineering Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred)total:
A)$ 32,000. 
B)$ 82,000. 
C)$ 158,000. 
D)$190,000.

Quizplus · Accepted Answer

C)$80,000 + $20,000 + $50,000 + ($40,000 × 20%)= $158,000

Fair Engineering Company Manufactures Part QE767 Used in Several of Its