Song, a division of Carolina Enterprises, currently makes 110,000 units of a product that has...
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Accounting
Song, a division of Carolina Enterprises, currently makes 110,000 units of a product that has created a number of manufacturing problems. Song's costs follow.
Manufacturing costs:
Variable
$ 580,000
Fixed
182,000
Allocated corporate administrative cost
68,000
If Song were to discontinue production, fixed manufacturing costs would be reduced by 80%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:
$580,000.
$793,600.
$616,400.
$725,600.
$762,000.
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