Ortega Industries manufactures 15,700 components per year. The manufacturing cost of the components was determined to be as follows: Direct materials $ 154,000 Direct labor 260,000 Variable manufacturing overhead 92,000 Fixed manufacturing overhead 140,000 Total $ 646,000 Assume that the fixed manufacturing overhead reflects the cost of Ortega's manufacturing facility. This facility cannot be used for any other purpose. An outside supplier has offered to sell the component to Ortega for $34. If Ortega Industries purchases the component from the outside supplier, the effect on operating profits would be a:

Ortega Industries manufactures 15,700 components per year. The manufacturing cost of the components was determined to be as follows: Direct materials $ 154,000 Direct labor 260,000 Variable manufacturing overhead 92,000 Fixed manufacturing overhead 140,000 Total $ 646,000 Assume that the fixed manufacturing overhead reflects the cost of Ortega's manufacturing facility. This facility cannot be used for any other purpose. An outside supplier has offered to sell the component to Ortega for $34. If Ortega Industries purchases the component from the outside supplier, the effect on operating profits would be a:

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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Direct materials	$ 154,000
Direct labor	260,000
Variable manufacturing overhead	92,000
Fixed manufacturing overhead	140,000
Total	$ 646,000

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