Question

Part "Celine" is used in one of Dion's products. The company's Accounting Department reports the following costs of producing the Direct materials.....................................................$4.50 Direct labor.........................................................$1.20 10,000 units of the part that are needed every year. Variable overhead.....................................................$2.70 Supervisor's salary...................................................$3.00 Depreciation of special equipment....................................$2.30 Allocated general overhead...........................................$1.80 An outside supplier has offered to make the part and sell it to the company for $11.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including 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. If the outside supplier's offer were accepted, only $2,000 of these allocated general overhead costs would be avoided. What factor(s) should Dion ignore in making this decision? Why?

          Part "Celine" is used in one of Dion's products. The company's Accounting Department reports the following costs of producing the
Direct materials.....................................................$4.50
Direct labor.........................................................$1.20
10,000 units of the part that are needed every year. Variable overhead.....................................................$2.70
Supervisor's salary...................................................$3.00
Depreciation of special equipment....................................$2.30
Allocated general overhead...........................................$1.80
An outside supplier has offered to make the part and sell it to the company for $11.70 each. If this offer is accepted, the supervisor's
salary and all of the variable costs, including 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. If the outside supplier's offer were accepted, only $2,000 of these allocated general overhead costs would be avoided.
What factor(s) should Dion ignore in making this decision? Why?

Part "Celine" is used in one of Dion's products. The company's Accounting Department reports the following costs of producing the
Direct materials.....................................................4.50
Direct labor.........................................................1.20
10,000 units of the part that are needed every year. Variable overhead.....................................................2.70
Supervisor's salary...................................................3.00
Depreciation of special equipment....................................2.30
Allocated general overhead...........................................1.80
An outside supplier has offered to make the part and sell it to the company for 11.70 each. If this offer is accepted, the supervisor's
salary and all of the variable costs, including 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. If the outside supplier's offer were accepted, only2,000 of these allocated general overhead costs would be avoided.
What factor(s) should Dion ignore in making this decision? Why?

Added by Nathaniel M.

Question

Please give Ace some feedback