Answer the following questions using the information below:
Donald's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Donald's Engine Company has the option of purchasing the part from an outside supplier at $42.50 per unit.
-If Donald's Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred)total:
A)$ 41,000
B)$ 49,000
C)$ 25,000
D)$50,000

Question

Answer the following questions using the information below:
Donald's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
  It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Donald's Engine Company has the option of purchasing the part from an outside supplier at $42.50 per unit.
-If Donald's Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred)total:
A)$ 41,000 
B)$ 49,000 
C)$ 25,000 
D)$50,000

Quizplus · Accepted Answer

The avoidable costs are the costs that will not be incurred if the company accepts the supplier's offer. The correct total of these costs is $41,000.

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