Billings Company Has the Following Costs When Producing 100,000 Units $\quad \$ 600,000$

question 56

Multiple Choice

Billings Company has the following costs when producing 100,000 units: Variable costs $\quad \$ 600,000$
Fixed costs $\quad 900,000$ An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000. The net increase (decrease) in the net income of accepting the supplier's offer is

• A)$285,000.
• B)$315,000.
• C)$(15,000).
• D)$840,000.

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Definitions:

Standard Price

A pre-determined cost that a company expects to pay for materials, labor, and overhead expenses.

Standard Price

A pre-determined cost assigned to a product or service, often used in budgeting and performance evaluations.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Yards

A measurement unit equal to three feet or 0.9144 meters, often used in expressing lengths or distances.