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Jackson Company manufactures 20,000 components per year. - Academic Heroes

Jackson Company manufactures 20,000 components per year.

The following information relates to a product produced by Henry Company:
February 12, 2020
Why might an experienced executive prefer account analysis to statistical cost estimation methods?
February 12, 2020

Jackson Company manufactures 20,000 components per year. The manufacturing cost of the components was determined

as follows:

Direct materials

$150,000

Direct labor

$120,000

Variable overhead

$80,000

Fixed overhead

$100,000

An outside supplier has offered to sell Jackson the component for $19. If Jackson purchases the component from the outside supplier, fixed costs would be reduced by $10,000. The manufacturing facilities would be unused and could be rented out for $10,000. Should Jackson accept the offer?

Yes, because the differential costs decrease by $30,000.

No, because the differential costs increase by $30,000.

No, because the differential costs increase by $10,000.

Yes, because the differential costs decrease by $10,000.

 
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