9Motor Company manufactures 10,000 units of Part M-l each year for use in its production. The following total costs were reportedlast year:Direct materials$20,000.00Direct labor$55,000.00Variable manufacturing overhead$45,000.00Fixed manufacturing overhead$70,000.00Total manufacturing cost$190,000.00Valve Company has offered to sell Motor 10,000 units of Part M-l for $16.50 per unit. If Motor accepts the offer, some of thefacilities presently used to manufacture Part M-l could be rented to a third party at an annual rental of $15,000. Additionally, $4 perunit of the fixed overhead applied to Part M-l would be totally eliminated. Should Motor Company accept Valve Company's offer,and why?A. No, because it would be $5,000 cheaper to make the part.B. Yes, because it would be $10,000 cheaper to buy the part.C. No, because it would be $15,000 cheaper to make the part.D. Yes, because it would be $25,000 cheaper to buy the part.E. None of the above

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Motor Company manufactures 10,000 units of Part M-l each year for use in its production. The following total costs were reported last year: Direct materials $20,000.00 Direct labor $55,000.00 Variable manufacturing overhead $45,000.00 Fixed manufacturing overhead $70,000.00 Total manufacturing cost $190,000.00 Valve Company has offered to sell Motor 10,000 units of Part M-l for $16.50 per unit. If Motor accepts the offer, some of the facilities presently used to manufacture Part M-1 could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to Part M-l would be totally eliminated. Should Motor Company accept Valve Company's offer, and why? A. No, because it would be $5,000 cheaper to make the part. B. Yes, because it would be $10,000 cheaper to buy the part. C. No, because it would be $15,000 cheaper to make the part. D. Yes, because it would be $25,000 cheaper to buy the part. E. None of the above

Motor Company manufactures 10,000 units of Part M-l each year for use in its production. The following total costs were reported last year: Direct materials $20,000.00 Direct labor $55,000.00 Variable manufacturing overhead $45,000.00 Fixed manufacturing overhead $70,000.00 Total manufacturing cost $190,000.00 Valve Company has offered to sell Motor 10,000 units of Part M-l for $16.50 per unit. If Motor accepts the offer, some of the facilities presently used to manufacture Part M-1 could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to Part M-l would be totally eliminated. Should Motor Company accept Valve Company's offer, and why? A. No, because it would be $5,000 cheaper to make the part. B. Yes, because it would be $10,000 cheaper to buy the part. C. No, because it would be $15,000 cheaper to make the part. D. Yes, because it would be $25,000 cheaper to buy the part. E. None of the above

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 2PB: Five Card Draw manufactures and sells 10,000 units of Aces, which retails for $200, and 8,000 units...

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