Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 13,000 units of Part B89 annually. The annual costs to produce Part B89 at the level of 13,000 units include: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $3.30 $8.10 $4.10 $3.50 $19.00 All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase 13,000 units of the part from the Nadal Parts Company for $20.40 each, and the facilities currently used to make the part could be rented out to another manufacturer for $23,000 a year, what should Lasso do? A. Buy the part and save $3.13 per unit. B. Make the part and save $3.13 per unit. C. Make the part and save $9.00 per unit. D. Buy the part and save $9.00 per unit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Subject  :- Account 

Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces
13,000
units of Part B89 annually. The annual costs to produce Part B89 at the level of
13,000
units include:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total cost
$3.30
$8.10
$4.10
$3.50
$19.00
All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an
outside supplier. Assuming Lasso can purchase 13,000 units of the part from the Nadal Parts Company for $20.40 each,
and the facilities currently used to make the part could be rented out to another manufacturer for $23,000 a year, what
should Lasso do?
A. Buy the part and save $3.13 per unit.
B. Make the part and save $3.13 per unit.
C. Make the part and save $9.00 per unit.
D. Buy the part and save $9.00 per unit.
Transcribed Image Text:Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 13,000 units of Part B89 annually. The annual costs to produce Part B89 at the level of 13,000 units include: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $3.30 $8.10 $4.10 $3.50 $19.00 All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase 13,000 units of the part from the Nadal Parts Company for $20.40 each, and the facilities currently used to make the part could be rented out to another manufacturer for $23,000 a year, what should Lasso do? A. Buy the part and save $3.13 per unit. B. Make the part and save $3.13 per unit. C. Make the part and save $9.00 per unit. D. Buy the part and save $9.00 per unit.
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education