At Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using the extra worker, the company will be able to engrave 8,000 more units per year. The selling price per unit is $16.00. The cost per unit currently is $11.70 as shown: Direct material $4.50 Direct labor 2.05 Variable overhead 1.40 Fixed overhead (primarily depreciation of equipment) 3.75 Total $11.70 What is the annual financial impact of hiring the extra worker for the bottleneck process?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.