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Rebelo Corporation Is Presently Making Part E07 That Is Used

question 3

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:

Competencies

Refers to the skills, knowledge, and abilities that individuals possess which enable them to perform effectively in their jobs or roles.

Strategic Work

Work that is planned and executed with a long-term goal in mind, often to achieve a competitive advantage.

Low-Value Activities

Tasks or processes that contribute minimal benefit to organizational goals, often identified for elimination or automation.

Competency

The ability of an individual to do a job properly, encompassing a combination of skills, knowledge, and behavior.