Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $24,919 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal:Almond Treats cost dataCostsAmountsDirect material$14,698Direct labor3,089Manufacturing overhead8,099A) The manufacturing overhead consists of $2,738 of variable costs with the balance being allocated to fixed costs. If Almond Treats buys the cereal, what is the effect on profit? If the effect is negative, use a dash - not parentheses ( ).

Here fixed overhead is not takes as it is sunk cost and irrelevant for decision making

Answered: Almond Treats manufactures various…

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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Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $24,919 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal:

Almond Treats cost data

Costs	Amounts
Direct material	$14,698
Direct labor	3,089
Manufacturing overhead	8,099

A) The manufacturing overhead consists of $2,738 of variable costs with the balance being allocated to fixed costs. If Almond Treats buys the cereal, what is the effect on profit? If the effect is negative, use a dash - not parentheses ( ).

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