A Company Produces 300 Microwave Ovens Per Month,each of Which

question 36

True/False

A company produces 300 microwave ovens per month,each of which includes one electrical circuit.The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract cost of $34 each.Currently,the cost of producing circuits in-house includes variable costs of $28 per circuit and fixed costs of $6,000 per month.The controller says that they could outsource production of the circuit,if it reduces fixed cost more than $1,800 per month.Is this statement true or false?

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Definitions:

Beginning Inventory

The value of a company's inventory at the start of an accounting period, prior to any purchases or production taking place.

Current Year

Refers to the ongoing calendar or fiscal year, often used in accounting and reporting to denote the present period.

LIFO

"Last In, First Out," an inventory valuation method where the goods purchased last are the first ones to be used or sold.

Gross Profit

The financial metric representing the difference between sales revenue and the cost of goods sold (COGS), before deducting overhead, payroll, taxes, and interest payments.