Rosiek Corporation uses part A55 in one of its products.The company's Accounting Department reports the following costs of producing the 4,000 units of the part that are needed every year. An outside supplier has offered to make the part and sell it to the company for $32.30 each.If this offer is accepted,the supervisor's salary and all of the variable costs,including direct labor,can be avoided.The special equipment used to make the part was purchased many years ago and has no salvage value or other use.The allocated general overhead represents fixed costs of the entire company.If the outside supplier's offer were accepted,only $4,000 of these allocated general overhead costs would be avoided.In addition,the space used to produce part A55 could be used to make more of one of the company's other products,generating an additional segment margin of $26,000 per year for that product.
Required:
a.Prepare a report that shows the effect on the company's total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company.
b.Which alternative should the company choose?
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q94: Brittman Corporation makes three products that use
Q99: The constraint at Artis Corporation is time
Q101: The management of Drummer Corporation is considering
Q103: Hayase Corporation processes sugar beets that it
Q105: Tingstrom Inc.makes a range of products.The company's
Q106: Part F77 is used in one of
Q107: Costs associated with two alternatives,code-named Q and
Q108: Zaccagnino Corporation makes a range of products.The
Q120: Hayase Corporation processes sugar beets that it
Q149: Bruce Corporation makes four products in a
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents