A 09 5 b 11 5 c 10 d 10 5 86 the rodgers company

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Intermediate Accounting: Reporting and Analysis
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Chapter 17 / Exercise E17-20
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
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A. $0.95B. $1.15C. $1.00D. $1.05
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Intermediate Accounting: Reporting and Analysis
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Chapter 17 / Exercise E17-20
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
Expert Verified
86.The Rodgers Company makes 27,000 units of a certain component each year for use in one of its products. The cost per unit for the component at this level of activity is as follows:Rodgers has received an offer from an outside supplier who is willing to provide 27,000 units of this component each year at a price of $25 per component. Assume that direct labor is a variable cost. None of the fixed manufacturing overhead would be avoidable if this component were purchased from the outside supplier.Assume that there is no other use for the capacity now being used to produce the component and the total fixed manufacturing overhead of the company would be unaffected by this decision. If Rodgers Company purchases the components rather than making them internally, what would be the impact on the company's annual net operating income? A. $94,500 increaseB. $81,000 decreaseC. $237,600 decreaseD. $124,000 increase
87.The Rodgers Company makes 27,000 units of a certain component each year for use in one of its products. The cost per unit for the component at this level of activity is as follows:Rodgers has received an offer from an outside supplier who is willing to provide 27,000 units of this component each year at a price of $25 per component. Assume that direct labor is a variable cost. None of the fixed manufacturing overhead would be avoidable if this component were purchased from the outside supplier.Assume that if the component is purchased from the outside supplier, $35,100 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the component would be rented to another company for $64,800 per year. If Rodgers chooses to buy the component from the outside supplier under these circumstances, then theimpact on annual net operating income due to accepting the offer would be: A. $18,900 decreaseB. $18,900 increaseC. $21,400 decreaseD. $21,400 increase
88.Meacham Company has traditionally made a subcomponent of its major product. Annual production of 20,000 subcomponents results in the following costs:Meacham has received an offer from an outside supplier who is willing to provide 20,000 units of this subcomponent each year at a price of $28 persubcomponent. Meacham knows that the facilities now being used to make the subcomponent would be rented to another company for $75,000 per year if the subcomponent were purchased from the outside supplier. Otherwise, the fixed overhead would be unaffected.If Meacham decides to purchase the subcomponent from the outside supplier, how much higher or lower will net operating income be than if Meacham continued to make the subcomponent? A. $45,000 higherB. $70,000 higherC. $30,000 lowerD. $70,000 lower
89.Meacham Company has traditionally made a subcomponent of its major product. Annual production of 20,000 subcomponents results in the following costs:Meacham has received an offer from an outside supplier who is willing to provide 20,000 units of this subcomponent each year at a price of $28 persubcomponent. Meacham knows that the facilities now being used to

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