The Southern Bell Company manufactures 2,000 telephones per year. The full manufacturing costs per telephone are as follows:
Direct materials $2
Direct labor 8
Variable manufacturing overhead 6
Average fixed manufacturing overhead 6
Total $22
The Illinois Bell Company has offered to sell Southern Bell Company 2,000 telephones at $15 per unit. If Southern Bell accepts the offer, $8,000 of fixed overhead will be eliminated. Southern Bell should:
a. Make the telephones, the savings is $2,000.
b. Buy the telephones, the savings is $10,000.
c. Buy the telephones, the savings is $12,000.
d. Make the telephones, the savings is $12,000
Answers: 2
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The Southern Bell Company manufactures 2,000 telephones per year. The full manufacturing costs per t...
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