Anderson Co If Anderson Accepts the Order, $8 of Fixed Overhead Per

question 32

Multiple Choice

Anderson Co. makes and uses 5,000 components each year in its manufacturing operations. An outside supplier has offered to supply the components to Anderson at $66 per unit. Anderson's production costs are as follows:
$\begin{array}{|l|l|}\hline \text { Direct materials } & \$ 8 \\\hline \text { Direct labor } & 32 \\\hline \text { Variable overhead } & 12 \\\hline \text { Fixed overhead(based on normal capacity) } & 34 \\\hline\end{array}$
If Anderson accepts the order, $8 of fixed overhead per unit will be eliminated.
What is the relevant cost to produce one unit?

• A) $86
• B) $52
• C) $78
• D) $60

Understand the difference between fiscal and calendar years in accounting.

Comprehend the principles of cash and accrual basis of accounting.

Recognize the purpose and principles of adjusting entries in accounting.

Grasp the impact of timing on revenue and expense recognition and its effect on financial statements.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good or service varies with the quantity produced.

Retail Coffee Price

The price at which coffee is sold to consumers in stores, cafes, or online platforms, reflecting the end cost including production, transportation, and markup.

Optimal Transfer Price

The price that optimizes the overall profit of a company with divisions, ensuring efficient resource allocation within the company.

Marginal Cost

The incremental cost of producing one more unit of a good or service.