McGraw Company Uses 5,000 Units of Part X Each Year

question 76

Essay

McGraw Company uses 5,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $100,000, computed as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 15,000 \\\text { Direct labor } & 30,000 \\\text { Variable manufacturing overhead } & 10,000 \\\text { Fixed manufacturing overhead } & 45,000 \\\text { Total costs } & \$ 100,000\end{array}$$ An outside supplier has offered to provide Part X at a price of $18 per unit. If McGraw Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost.
Required:
Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer.

Identify key concepts of Piagetian theory, such as object permanence, operation, egocentrism, and conservation.

Recognize the development of language and memory in children.

Understand the concept of the zone of proximal development and its theorist.

Grasp the progression of logical reasoning and working memory in children.

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Definitions:

Peak

The transition from the end of an expansion to the start of a contraction.

Business Cycle

The fluctuation in economic activity that an economy experiences over a period, characterized by expansion and contraction phases.

Corporate Tax Rate

The proportion of a company's profits that is owed to the government as tax.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and loan payments.