Reuben's Deli currently makes rolls for deli sandwiches itproduces. It uses 30,000 rolls annually in the production ofdeli sandwiches. The costs to make the rolls are:CostsReuben's Deli cost dataAmountsMaterialsLaborVariable overheadFixed overheadIncrements$0.24 per roll0.40 per roll0.16 per roll0.20 per rollA potential supplier has offered to sell Reuben the rolls for$0.90 each. If the rolls are purchased, 30% of the fixedoverhead could be avoided. If Reuben accepts the offer, whatwill the effect on profit be?

Basically make or buy decision is taken by relevant cost analysis .Relevant costs are the avoidable…

A potential supplier has offered to sell Reuben the rolls for $0.90 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?

A potential supplier has offered to sell Reuben the rolls for $0.90 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Reuben's Deli currently makes rolls for deli sandwiches it
produces. It uses 30,000 rolls annually in the production of
deli sandwiches. The costs to make the rolls are:
Costs
Reuben's Deli cost data
Amounts
Materials
Labor
Variable overhead
Fixed overhead
Increments
$0.24 per roll
0.40 per roll
0.16 per roll
0.20 per roll
A potential supplier has offered to sell Reuben the rolls for
$0.90 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?

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