Answer:
The decision is incorrect. It is cheaper to make in house.
Explanation:
Giving the following information:
Make in house:
Direct materials and direct labor 10
Variable factory overhead 6
Fixed factory overhead 4
The company recently decided to buy 10,000 fishing reels from another manufacturer for $18
We need to calculate the unitary variable cost of production. Fixed costs are unavoidable, therefore they shouldn't be taken into account.
Variable cost= direct material + direct labor + variable overhead
Variable cost= 10 + 6= $16
The decision is incorrect. It is cheaper to make in house.
Answer:
A. its operating income for the period will be higher than under absorption costing
Explanation:
As we know that
Under absorption costing, the fixed cost is divided on the number of units produced
And under the variable costing, the fixed cost is considered as a cost selling of goods so the absorption costing method will be lower than the value of finished goods.
As per the question, the started finished goods will help and sell the whole production and starting balance that means under absorption costing of goods which is to be sold is much than variable costing.
Answer:
$378
Explanation:
Interest expenses in current year = Amount of borrowing*Interest rate*8 month/12 months
Interest expenses in current year = $30,000 * 6.75% * 8/12
Interest expenses in current year = $1,350
Tax saving on interest expenses = Interest expenses * Tax rate
Tax saving on interest expenses = $1,350 * 28%
Tax saving on interest expenses = $378
So, their tax savings for the first year ending December 31 will be $378.
