Use the following to answer questions 26-27:
Taylor manufactures 12,000 units of a part used in its production to manufacture guitars. The annual production activities related to this part are as follows:
Direct materials, $24,000
Direct labor, $66,000
Variable overhead, $54,000
Fixed overhead, $84,000
Best Guitars, Inc., has offered to sell 12,000 units of the same part to Taylor for $22 per unit. If Taylor were to accept the offer, some of the facilities presently used to manufacture the part could be rented to a third party at an annual rental of $18,000. Moreover, $4 per unit of the fixed overhead applied to the part would be totally eliminated.
26. |
What should Taylor's decision be, and what is the total cost savings that would result? |
|
A) |
Buy, $59,400 |
|
B) |
Make, $77,400 |
|
C) |
Buy, $77,400 |
|
D) |
Make, $59,400 |
27. |
In the decision to make or buy the part, what is the relevant fixed overhead? |
|
A) |
$42,600 |
|
B) |
$84,000 |
|
C) |
$30,600 |
|
D) |
$54,600 |
Use the following to answer questions 26-27: Taylor manufactures 12,000 units of a part used in...
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