Canada Sailboats Company manufactures 10 luxury yachts per month
A compact media center is included in each yacht. Canada Sailboats manufactures the media center in-house but is considering the possibility of outsourcing this function. At present, the variable cost per unit is $270, and the fixed costs are $40,000 per month. Justin Blake, the CEO, wishes to increase operating income by $3,000. He has an offer from a foreign producer to provide the media centers at a contract cost of $325 per unit. The required saving in fixed cost in order to achieve his objective would be ________.
A) $3,000
B) $550
C) $3,550
D) $2,700
C .C)
Variable cost (10 x $270 ) $2,700
Purchase cost (10 x $325 ) 3,250
Loss on outsourcing $550
Add: Target increase in operating income 3,000
Required savings in fixed cost $3,550
You might also like to view...
A sewing machine has a mean time between failures of 296 hr and mean time to repair of 11 hr. In this case, the availability is ______.
A. 96.4% B. 92.1% C. 89.3% D. 78.9%
How can activity-based systems help managers in a global marketplace?
The last security interest to be perfected is the first in priority over any other perfected security interests.
Answer the following statement true (T) or false (F)
A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
A) $0 B) $5,000 C) $2,500 D) $10,000