Evaluate the amount of avoidable costs

Reference no: EM139633

Q1. Jones Company manufactures widgets. Old Ham Company has approached Jones with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:

Direct material	$44,000
Direct labor	20,000
Manufacturing overhead	60,000
Total	$124,000

The manufacturing overhead consists of $32,000 of costs that will be eliminated if the components are no longer produced by Jones. The remaining manufacturing overhead will continue whether or not Jones makes the components.

What is the amount of avoidable costs if Jones buys rather than makes the components?

A) $60,000

B) $96,000

C) $124,000

D) $100,000

Q2. The value of benefits foregone by selecting one decision alternative over another is a(n)

A) differential revenue.

B) sunk cost.

C) opportunity cost.

D) incremental benefit.

Reference no: EM139633

Questions Cloud

What kind of tool is this : On the back of an envelope, Phoebe writes: "I promise to pay $ 600 Characteristic or bearer on demand [Signed] Phoebe .." What kind of tool is this?

Computation of hpr listed price of a bond and value : Computation of HPR listed price of a bond and value of put option and You put up $50 at the beginning of the year for an investment

What type of instrument is this : On a sheet paper, Elle writes, without her sign, “I acknowledge that I owe Frank $600, payable out of the proceeds of the sale of my car, a 2003 Honda Civic, which I promise to advertise ‘For Sale’ next week.

Computation of future contract value : Computation of future contract value and what is the farmer's net proceeds when corn is sold

Evaluate the amount of avoidable costs : What is the amount of avoidable costs if Jones buys rather than makes the components . The value of benefits foregone by selecting one decision alternative over another.

Computation of change in long term debt account : Computation of change in long term debt account balance and How much did the long term debt accounts of Hewlett Packard change

Compute the break-even point : How many dollars of revenue must K-Henry's find in order to reach the break-even point? Evaluate the price be if the company expected a volume of 120,000 units and used a markup of 50%?

Increase your awareness of nonverbal communication : What nonverbal signals are you now aware of that you may send to others and their reaction to them?

Computaion of market to book ratio : Computaion of market to book ratio and A firm has current assets which could be sold for their book value of $10 million

User Account

All Pages