Answer the Following Questions Using the Information Below:
Genent's Engine

Answer the following questions using the information below:
Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 46,000 \\\text { Direct labor } & 11,500 \\\text { Variable overhead costs } & 34,500 \\\text { Fixed overhead costs } & 23,000 \\\quad \text { Total costs } & \$ 115,000\end{array}$ It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit.
-If Genent's Engine Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred) total ________.

A) $93,840
B) $92,000
C) $115,000
D) $116,840

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free