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Your company produces 1,000 units of a necessary component with the following costs ...

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Question

Accounting

Your company produces 1,000 units of a necessary component with the following costs

Direct Materials

24,000

Direct Labor

16,000

Variable Overhead

4,000

Fixed Overhead

7,000

The company could avoid $3,000 in fixed overhead costs and another product could be made that would increase profit contribution by $8,000 if the components were acquired externally ($43 per unit). Management decided to manufacture the product to increase net income by $20,000.

Opinion

Justification

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