The SP Corporation makes 32,000 motors to be used in the production of ts sewing machines. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $9.10 $8.10 $3.25 $4.20 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $2275. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could avoided. Direct iabor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside suppler would be: Multiple Choice

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Reinhart Corporation makes bicycles. For many years, Reinhart has made the rear wheel assembly for its bicycles. Recently, Bennett Company offered to sell these rear wheel assemblies to Reinhart. If Reinhart makes the assembly, its cost per rear wheel assembly is as follows:                                                                                                                            Direct materials                                            $10.00                         Direct labor                                                     18.00                         Variable manufacturing overhead                  10.00                         Fixed manufacturing overhead, avoidable       8.00                                       Fixed manufacturing overhead, unavoidable                         (allocated on the basis of labor-hours)           10.00                                       Unit product cost                                          $56.00                 These…

Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $12.90 Total $ 106,500 $ 92,300 $ 28,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…