LeDuc Inc. produces a line of products which includes men’s wallets. During 2011, there are 4,000 wallets budgeted for production with a total material cost for the wallets of $18,860 and direct labor totaling $10,250. Manufacturing overhead costs are budgeted at $2.80 per wallet of which $1.22 is variable. Unavoidable fixed overhead is 30% of total fixed overhead. Good Supply has offered to sell the wallets to LeDuc for $9.00 each. Required A. Use incremental analysis to determine if the company should outsource. B. What qualitative factors should the company consider in making the decision?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Problem 2
LeDuc Inc. produces a line of products which includes men’s wallets. During 2011, there are 4,000 wallets budgeted for production with a total material cost for the wallets of $18,860 and direct labor totaling $10,250.
A. Use incremental analysis to determine if the company should outsource.
B. What qualitative factors should the company consider in making the decision?
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