Solved

Rebelo Corporation Is Presently Making Part E07 That Is Used

question 169

Multiple Choice

Rebelo Corporation is presently making part E07 that is used in one of its products. A total of 17,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: An outside supplier has offered to make and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part E07 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?

Definitions:

Dendrites

Extensions of a neuron that receive signals from other neurons and conduct them toward the cell body.

Nerve Fibers

Extensions of nerve cells that transmit electrical impulses between different parts of the body, essential for communication within the nervous system.

Glial Cell

Cells within the central and peripheral nervous system that are not neurons, which serve to support and safeguard neuronal cells.

Oligodendrocyte

A type of glial cell in the central nervous system that produces myelin, a substance that insulates nerve fibers to enhance signal transmission.