Part N19 Is Used by Malouf Corporation to Make One

question 68

Multiple Choice

Part N19 is used by Malouf Corporation to make one of its products. A total of 7,000 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 the part and sell it to the company for $24.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the 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. In addition, the space used to make part N19 could be used to make more of one of the company's other products, generating an additional segment margin of $25,000 per year for that product. What would be the impact on the company's overall net operating income of buying part N19 from the outside supplier?

• A) Net operating income would decline by $21,900 per year.
• B) Net operating income would decline by $60,700 per year.
• C) Net operating income would decline by $10,700 per year.
• D) Net operating income would increase by $25,000 per year.

Explain the filing deadlines and extensions for corporate tax returns.

Describe the Subchapter S election process and timing requirements.

Understand the adjustments necessary to reconcile book income to taxable income and the treatment of specific types of income and expenses.

Analyze the tax implications of corporate distributions, including the determination of dividend income.

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Definitions:

Animalistic Depictions

Representations of humans or characters with exaggerated animal traits, often used metaphorically or symbolically in various forms of media.

Black Masculinity

Culturally specific constructs and perceptions of masculinity experienced by Black men, often shaped by historical, social, and political factors.

Feudalism

A social and economic system in medieval Europe, where land was held on condition of allegiance and service to a lord, with society structurally divided into classes such as lords, vassals, and serfs.

Less Mature

Describes an individual or entity showing a lower level of growth, development, or sophistication.