QzRelevantCstng_09

QzRelevantCstng_09 - 1 APPLIED MANAGERIAL ACCOUNTING QUIZ -...

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APPLIED MANAGERIAL ACCOUNTING QUIZ - RELEVANT COSTING Marked by: ________________________ Name: ____________________________ Sec.____ QUESTION 1: (6 Marks) Fontaro Company is currently manufacturing Part K96, producing 50,000 units annually. The part is used in the production of several products made by Fontaro. The mfg. cost per unit for K96 is as follows: Direct Materials: $7.00 Direct labour $3.00 Variable MO $1.50 Fixed MO $2.50 Of the total fixed overhead of $125,000 (50,000 x $2.50), 72% is avoidable if part K96 is bought outside. The remaining fixed overhead is common to all products and cannot be avoided. An outside supplier has offered to sell part K96 to Fontaro for $14.00. If Fontaro decides to buy from the outside supplier, factory space will be freed up that can be sub-let for $25,000. a) Show what decision Fontaro should make and the $ effect.(5) b) What is the maximum price Fontaro would be willing to pay per unit to an outside supplier? (1)
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This note was uploaded on 03/03/2012 for the course ACCT 2460 taught by Professor Farrar during the Winter '12 term at Conestoga.

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QzRelevantCstng_09 - 1 APPLIED MANAGERIAL ACCOUNTING QUIZ -...

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