Bell's Shop Can Make 1000 Units of a Necessary Component

question 166

Multiple Choice

Bell's Shop can make 1000 units of a necessary component with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 24,000 \\\text { Direct Labor } & 6,000 \\\text { Variable Overhead } & 3,000 \\\text { Fixed Overhead } & ?\end{array}$$ The company can purchase the 1000 units externally for $39000.The unavoidable fixed costs are $2000 if the units are purchased externally.An analysis shows that at this external price the company is indifferent between making or buying the part.What are the fixed overhead costs of making the component?

• A)$8000
• B)$6000
• C)$4000
• D)Cannot be determined.

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Definitions:

Traditional Management Accounting

An accounting approach focused on financial information, cost control, and budgeting techniques within an organization, traditionally emphasizing internal reporting.

Environmental Cost Data

Information related to the expenses incurred by a company due to environmental protection, pollution control, and the sustainable use of resources.

Environmental Costs

Expenses associated with the negative impact of a company's actions on the environment, including remediation, prevention, and external costs.

Conventional

Pertaining to common practices, methods, or standards that are widely accepted and employed.