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. The cost per unit currently is $11.85 as shown: (Refer to attached image) What is the annual financial impact of hiring the extra worker for the bottleneck process?
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. The cost per unit currently is $11.85 as shown: (Refer to attached image) What is the annual financial impact of hiring the extra worker for the bottleneck process?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E-12
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. The cost per unit currently is $11.85 as shown: (Refer to attached image)
What is the annual financial impact of hiring the extra worker for the bottleneck process?
Transcribed Image Text:Direct material
$ 4.50
Direct labor
2.10
Variable overhead
1.45
Fixed overhead (primarily depreciation of equipment)
3.80
Total
$11.85
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