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(Solved):   Jobs, Inc. produces the Ultimate computer chip:        & ...



 

Jobs, Inc. produces the Ultimate computer chip:

                                                                                    Unit Cost

                                        Direct materials                        $ 200

                                        Direct labor                                 240

                                        Variable overhead                       160

                                        Fixed overhead (40%

                                             avoidable)                              300

 

An outside supplier has offered to produce the chip for Jobs for $700.

 

If 10,000 units are needed each year, what will be the effect on net income if the computer chip is purchased from the outside supplier?

Multiple Choice

Decrease by $1,000,000

$600,000

Increase by $800,000

Increase by $200,000



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The Relevant Cost of Production in Inhouse and Relevant Cost of Buying the Product from Outsider will have to be calculated, it will be calculated as
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