Yukon Corporation makes 30,000 motors to be used in the productions of its power lawn mowers....

Yukon Corporation makes 30,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows:

Direct materials ............................ $9.50

Direct labor .................................. $8.60

Variable manufacturing overhead.. $3.75

Fixed manufacturing overhead ..... $4.35

This motor has recently become available from an outside supplier for $25 per motor. If Yukon decides not to make the motors, none of the fixed manufacturing overhead would be avoidable and there would be no other use of the facilities. If Yukon decides to continue making the motor, how muchhigher or lower will the company's net operating income be than if the motors are purchased from the outside supplier? Assume that direct labor is a variable cost for this company.

	A.	$36,000 lower
	B.	$207,000 higher
	C.	$94,500 higher
	D.	$130,500 higher
	E.	$42,500 lower
	F.	none of the above are correct

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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