Your company produces 1,000 units of a necessary component with the following costs ...
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Accounting
Your company produces 1,000 units of a necessary component with the following costs
| Direct Materials | 24,000 |
| Direct Labor | 16,000 |
| Variable Overhead | 4,000 |
| Fixed Overhead | 7,000 |
The company could avoid $3,000 in fixed overhead costs and another product could be made that would increase profit contribution by $8,000 if the components were acquired externally ($43 per unit). Management decided to manufacture the product to increase net income by $20,000.
| Opinion |
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| Justification |
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