Cost Accounting Quiz
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DECISION MAKING USING COST INFORMATION
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Quantum Enterprises needs 5,000 units of a specialized circuit board for its production. The company can make the boards internally. The cost to make one board is $80 for direct materials, $50 for direct labor, and $20 for variable overhead. The equipment used for production has a book value of $100,000 and annual depreciation of $20,000. If production is outsourced, this equipment can be sold for a salvage value of $30,000. The fixed overhead allocated to this production line is $150,000 annually, which includes the depreciation. All other fixed overhead is unavoidable. A supplier offers the boards for $153 each. Considering the financial impact for the first year, what is the advantage or disadvantage of buying the boards?
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