Use the Following Information for Questions
Clemente Inc An Outside Supplier Has Offered to Sell Clemente the Subcomponent

question 89

Multiple Choice

Use the following information for questions
Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: $$\begin{array} { l l } \text { Direct materials } & \$ 8,400 \\\text { Direct labor } & 11,250 \\\text { Variable overhead } & 12,600 \\\text { Fixed overhead } & 16,200\end{array}$$ An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit.
-If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be

• A) $150.
• B) $7,350.
• C) $(150).
• D) $(3,600).

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, representing a portion of the corporate profits distributed among shareholders.

Market Price

The amount at which something can be bought or sold on a given market.

Gross Margin Percentage

A financial metric that measures a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS).

Return On Equity

A financial ratio indicating the profitability of a firm in relation to its shareholders' equity, measuring how much profit is generated from the equity.