During 20x6, America, Inc., produced, among other products, 8,700 cameras, incur

Question

During 20x6, America, Inc., produced, among other products, 8,700 cameras, incurring the following unit costs: $5 in direct materials, $3 in direct labor, $2 in variable overhead, $4 in fixed overhead, $0.50 in variable selling and administrative expenses, and $1 in fixed selling and administrative expenses. An outsider had offered to produce the cameras for $12 each. Assuming that the factory space would have been idle otherwise, acceptance of the outside offer would have

a) lost the company $13,050

b) saved the company $18,050

c) lost the company $8,700

d. saved the company $33,050

Explanation / Answer

Therefore, the right answer is option (a) $ 13,050

Computation of relevant cost Direct Materials 5 Direct Labour 3 Variable overheads 2 Variable selling and administration expenses 0.5 Relevent cost of Buying 10.5 Outsiders price 12 Difference -1.5 Number of cameras 8700 Lost to the company -13050

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.