Question

Multiple Choice Question 77 Marigold Corp. incurs the following costs to produce 10100 units of a subcomponent: Direct materials Direct labor Variable overhead Foxed overhead $8484 11413 12726 16200 An outside supplier has offered to sell Marigold the subcomponent for $2.85 a unit If Marigold could avoid $3000 of fixed overhead by accepting the offer, net income would increase (decrease) by $838 $(5929) $(3364) $6838

Answer 1

Variable Manufacturing cost per unit

= (8484+11413+12726)/10100 = 3.23

Cost of making = 3.23*10100 = 32,623

Cost if bought = (10,100*2.85)-3000 = 25,785

= 32,623 - 25,785

= 6838

Option D