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Business, 19.10.2020 20:01 mucciak9414

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 180,000 wheels annually are: Direct materials $36,000
Direct labor $54,000
Variable manufacturing overhead $27,000
Fixed manufacturing overhead $66,000

An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $21,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $51,000 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would:

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The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to pr...
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