Business, 25.06.2020 04:01 neidaq12345

Ace Inc. produces custom widgets. The cost structure for each widget it manufactures is as follows: Direct materials $4.00 per unit
Direct labor $6.00 per unit
Variable manufacturing overhead $2.00 per unit

Allocated fixed manufacturing overhead $10.00 per unit (based on 10,000 units) Beta Corp. offers to sell 10,000 widgets to Ace for $16.00 per unit. The widgets would be of equal or better quality and Beta can deliver 10,000 units with no problem. If Ace accepts the offer, none of its fixed costs will be avoidable.

If Ace accepts the offer and buys 10,000 widgets from Beta:

a. Ace will save $60,000.
b. Ace will spend $60,000 more.
c. Ace will spend $40,000 more.
d. Ace will save $40,000

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Ace Inc. produces custom widgets. The cost structure for each widget it manufactures is as follows:...

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