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Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to...

Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,240 remotes is as follows:

Direct Materials $66,560
Direct Labor 56,320
Variable Overhead 30,720
Fixed Overhead 51,200
Total 204,800

Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required:

1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the difference in cost per unit? What is the change in net income?

2. Compute the difference in cost between making and buying the remotes if $20,480 of the fixed costs can be avoided. What is the Difference in Cost per unit? What is the change in net income?

3. What is the change in net income if fixed cost of $20,480 can be avoided and Frannie could rent out the factory space no longer in use for $20,480?

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ekkarill92 answered 1 year ago
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