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Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 26,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are:
| Materials | $0.24 per roll |
| Labor | 0.39 per roll |
| Variable overhead | 0.15 per roll |
| Fixed overhead | 0.20 per roll |
A potential supplier has offered to sell Reuben the rolls for $0.88 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be?
Reuben would see a $fill in the blank
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- Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 30,000 parts is $100,000, which includes fixed costs of $40,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income? A. decrease of $8,000 B. decrease of $24,000 C. increase of $16,000 D. increase of $24,000Carondelet Coffee has begun making and selling pastries. The fixed costs of making the pastry are $4,000, and the company estimates that the variable costs are $.75 per pastry. How many pastries does Carondelet have to sell to earn net income of $5,000 if it sells each pastry for $3 apiece?Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Adams for $2.80 each.Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
