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Jeff Company produces a part that is used in the manufacture of one of its products The annual costs associated with the production of 11000 units of this part are as follows Direct materials

Jeff Company produces a part that is used in the manufacture of one of its products. The annual costs associated with the production of 11,000 units of this part are as follows:
Direct materials ………… $ 25,000
Direct labor …………. 34,000
Indirect production costs variable ….. 65,000
Indirect production costs fixed …… 40,000
Total costs ………….. $164,000
A supplier is willing to sell 11,000 units of the part to Jeff Company for $12.50 per unit. When examining the indirect production costs fixed, Jeff Company determines $10,000 is avoidable.

 

Required:
If there are no alternative uses for the facilities, should Jeff Company take advantage of the supplier’s?

Apr 02 2020 View more View Less

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