7. Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: Direct material $14,000 Direct labor 6,000 Manufacturing overhead 8,000 Total $28,000 The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). What is Oat Treats' relevant cost? What does Simmons Cereal's offer cost? If Oat Treats accepts the offer, what will the effect on profit be. Incremental dollar amount = ? . Increase or Decrease? . Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes.
7. Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: Direct material $14,000 Direct labor 6,000 Manufacturing overhead 8,000 Total $28,000 The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). What is Oat Treats' relevant cost? What does Simmons Cereal's offer cost? If Oat Treats accepts the offer, what will the effect on profit be. Incremental dollar amount = ? . Increase or Decrease? . Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
7. Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently:
| Direct material | $14,000 |
| Direct labor | 6,000 |
| Manufacturing |
8,000 |
| Total | $28,000 |
The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs.
PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345).
- What is Oat Treats' relevant cost?
- What does Simmons Cereal's offer cost?
- If Oat Treats accepts the offer, what will the effect on profit be.
- Incremental dollar amount = ? .
- Increase or Decrease? . Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes.
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