Henderson Manufacturing Inc Henderson Manufacturing Inc manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 10,000 motors are manufactured each year, the motor costs per unit are as follows: Direct materials $5 Direct labor 5 Variable overhead 2 Fixed overhead 7 Plymouth Inc has offered to sell Henderson 10,000 motors for $14
per unit. If Henderson accepts the offer, 50% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Henderson Manufacturing Inc information above. If Henderson accepts the offer to purchase 6,000 motors from Plymouth, the net income will:
A) decrease by $9,000.
B) increase by $10,000.
C) decrease by $10,000.
D) increase by $9,000.
D
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Why is it important for organizations to conduct post investment audits of capital projects?
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