2C2D REFRIGERATOR COMPANY MANUFACTURES ICE-MAKERS FOR INSTALLATION IN...
225.
CSO: 2C2a
LOS: 2C2d
Refrigerator Company manufactures ice-makers for installation in refrigerators. The
costs per unit, for 20,000 units of ice-makers, are as follows.
Direct materials
$ 7
Direct labor
12
Variable overhead
5
Fixed overhead
10
Total costs
$34
Cool Compartments Inc. has offered to sell 20,000 ice-makers to Refrigerator Company
for $28 per unit. If Refrigerator accepts Cool Compartments’ offer the plant would be
idled and fixed overhead amounting to $6 per unit could be eliminated. The total relevant
costs associated with the manufacture of ice-makers amount to
a.
$480,000.
b.
$560,000.
c.
$600,000.
d.
$680,000.