Concord Company produces Optimist sailboats. The costs of producing 107000 tiller extensions for use in the boats are as follows:Direct labor$253000Direct materials302000Variable overhead66000Fixed overhead185000An outside supplier has offered to supply the tiller extensions for $725000. If Concord accepts the offer $86000 of fixed costs can be avoided. What is the financial advantage (disadvantage) of accepting the supplier’s offer? $26000 ($5000) ($26000) $5000

Compute the increase or decrease in the net income:

Answered: Concord Company produces Optimist…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

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Concord Company produces Optimist sailboats. The costs of producing 107000 tiller extensions for use in the boats are as follows:

Direct labor	$253000
Direct materials	302000
Variable overhead	66000
Fixed overhead	185000

An outside supplier has offered to supply the tiller extensions for $725000. If Concord accepts the offer $86000 of fixed costs can be avoided. What is the financial advantage (disadvantage) of accepting the supplier’s offer?

$26000

($5000)

($26000)

$5000

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