Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the motor used to power the scooter, but is considering buying the motor from an outside supplier. The manufacturing costs for Riders to make 20,000 motors are as follows: Cost per motor Direct material$28.50Direct labor$13.25Overhead$18.00An outside supplier offers to supply Riders with all the motors it needs at $55.00 per unit. If Riders buys the motors from the supplier, it will still incur 80% of its overhead costs. Based on the above information, the financial advantage (disadvantage) of buying the 20,000 motors from the outside supplier is: a.($265,000) b.None of the other answers are correct c.$95,000 d.($193,000) e.$23,000

Avoidable Cost is relevant cost in decision making process. and unavoidable cost is not relevant in…

Answered: Riders, Ltd. is a manufacturer that…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the motor used to power the scooter, but is considering buying the motor from an outside supplier. The manufacturing costs for Riders to make 20,000 motors are as follows:

	Cost per motor
Direct material	$28.50
Direct labor	$13.25
Overhead	$18.00

An outside supplier offers to supply Riders with all the motors it needs at $55.00 per unit. If Riders buys the motors from the supplier, it will still incur 80% of its overhead costs. Based on the above information, the financial advantage (disadvantage) of buying the 20,000 motors from the outside supplier is:

	a.	($265,000)
	b.	None of the other answers are correct
	c.	$95,000
	d.	($193,000)
	e.	$23,000

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