At RIM, Sharpton Corporation, the engraving department is a bottleneck and the company is considering hiring an extra worker whose salary will be $55,000 per year to mitigate the problem. With the extra worker, the company will be able to produce and sell 7,000 more units per year. The selling price per unit is $14. Cost per unit currently at $8 is as follows: Direct material $2.75 Direct labour 1.00 Variable overhead 0.25 Fixed overhead (depreciation of equipment) 4.00 ----------- Total $8.00 ------------ Required: Calculate the financial impact of hiring the extra worker.
At RIM, Sharpton Corporation, the engraving department is a bottleneck and the company is considering hiring an extra worker whose salary will be $55,000 per year to mitigate the problem. With the extra worker, the company will be able to produce and sell 7,000 more units per year. The selling price per unit is $14. Cost per unit currently at $8 is as follows:
Direct material $2.75
Direct labour 1.00
Variable
Fixed overhead (
-----------
Total $8.00
------------
Required: Calculate the financial impact of hiring the extra worker.
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