Averette & Averette Averette & Averette, a Local Dental Practice, Currently Makes Its

question 30

Multiple Choice

Averette & Averette
Averette & Averette, a local dental practice, currently makes its own dentures for customers. The dental practice has one part-time employee who comes in weekly to make dentures. The employee is paid $150 per denture set. The direct materials and variable overhead cost per set of dentures is $75 and $25, respectively. In addition, the practice allocates $10 000 of fixed overhead to the denture-making department. The practice makes 1000 sets of dentures per year. An outside company who specialises in the making of dentures has offered to make each set of dentures for Averette & Averette for $255 per set.

-If Averette & Averette outsources the making of dentures,net income will:

• A) decrease by $15 000.
• B) increase by $5000.
• C) increase by $15 000.
• D) decrease by $5000.

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Definitions:

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid or recorded in the company's accounts.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, presenting the financial results over a specific period.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Daily Wages

Compensation based on the number of days worked, typically paid to temporary or contract workers.