How will the decision affect the company

Reference no: EM131947159

Question: Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component, Component Y, for one of its products are given below. The annual requirement of Component Y is 2,200 units. Direct materials $19,800 Direct labor 11,000 Variable manufacturing overhead 15,400 Fixed manufacturing overhead 13,200 An external supplier offers to sell the component to Blanrin Inc. for $23 per unit. After analysis, it is found that if the company buys the component instead of producing it, all of its variable costs and $8, 200 of its fixed overhead costs will be eliminated. If Blanrin Inc. decides to buy the component instead of manufacturing it, how will the decision affect the company? Its net income will decrease by $3,800 Its net income will increase by $3,800 Its net income will increase by $4, 400 Its net income will increase by $8,200.

Reference no: EM131947159

Questions Cloud

The stock is expected to pay dividend : The stock is expected to pay a dividend of $1.25 at the end of the year. What is the Stocks one year from today?

Explain why so many lottery winners end up with poverty : Bob is twenty years old and has initial wealth of $-20,000. He expects to work up to age 70, with the first ten years of earning $50,000 annually.

Adding the profitability index to decision-making process : What value might the financial decision maker gain by adding the profitability index to the decision-making process?

Disucss an ethical problem with process costing approach : Evaluate whether there is an ethical problem with process costing approach. Support your response with a suitable example.

How will the decision affect the company : Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component, Component Y.

Determine the required rate of return on the security : Determine the required rate of return on the security.

Which system should the firm invest : Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new.

Compound growth rate of dividends based on last five years : What is the compound growth rate of dividends based on the last five years of dividends data? What is the average year-to-year dividend growth rate?

What annual savings can bloomies expect : Bloomies expects to have $11739064 in credit sales during the coming year. Currently, all checks are sent to the home office.

User Account

All Pages