FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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RelyaTech Corporation makes an extra large part to use in one its fabulous products. A total of 19,000 units of this extra large part are
produced and used every year. The company's costs of producing the extra large part at this level of activity are below.
Direct materials
Direct labor
Variable manufacturing overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
Per
Unit
$4.10
$8.70
$9.20
$4.60
$3.00
$8.20
(ID#32835)
An outside supplier has offered to make the extra large part and sell it to RelyaTech for $29.50 each.
If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided.
The special equipment used to make the extra large part has no salvage value or other use.
The allocated general overhead represents fixed costs of the entire RelyaTech company, none of which would be avoided if the part were
purchased instead of produced internally. In addition, the space used to make the extra large part could be used to make more of one of the
company's other fabulous products, generating an additional segment margin of $31,000 per year for that product
O) What would be the annual financial advantage (disadvantage) for RelyaTech Corp, as a result of buying the extra large part from the outside
supplier?
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Transcribed Image Text:RelyaTech Corporation makes an extra large part to use in one its fabulous products. A total of 19,000 units of this extra large part are produced and used every year. The company's costs of producing the extra large part at this level of activity are below. Direct materials Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $4.10 $8.70 $9.20 $4.60 $3.00 $8.20 (ID#32835) An outside supplier has offered to make the extra large part and sell it to RelyaTech for $29.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the extra large part has no salvage value or other use. The allocated general overhead represents fixed costs of the entire RelyaTech company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make the extra large part could be used to make more of one of the company's other fabulous products, generating an additional segment margin of $31,000 per year for that product O) What would be the annual financial advantage (disadvantage) for RelyaTech Corp, as a result of buying the extra large part from the outside supplier?
Multiple Choice
($102,000)
$(24,100)
$31,000
($172,900)
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Transcribed Image Text:Multiple Choice ($102,000) $(24,100) $31,000 ($172,900)
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