Marcus Company requires three units of P11 for every unit of A5 that it produces. Currently, P11 is made by Marcus, with the following per unit costs in a month when 4,000 units were produced: Direct materials Direct labor Manufacturing overhead Total $4.00 1.50 2.60 $8.10 Variable manufacturing overhead is applied at $1.00 per unit. The other $1.60 of overhead consists of allocated fixed costs. Marcus will need 6,000 units of P11 for next year's production. Landers Corporation has offered to supply 6,000 units of P11 at a price of $7.00 per unit. If Marcus accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Calculate incremental profit. Incremental profit $ Should Marcus Company accept the offer from Landers Corporation? Marcus should not accept the offer.
Marcus Company requires three units of P11 for every unit of A5 that it produces. Currently, P11 is made by Marcus, with the following per unit costs in a month when 4,000 units were produced: Direct materials Direct labor Manufacturing overhead Total $4.00 1.50 2.60 $8.10 Variable manufacturing overhead is applied at $1.00 per unit. The other $1.60 of overhead consists of allocated fixed costs. Marcus will need 6,000 units of P11 for next year's production. Landers Corporation has offered to supply 6,000 units of P11 at a price of $7.00 per unit. If Marcus accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Calculate incremental profit. Incremental profit $ Should Marcus Company accept the offer from Landers Corporation? Marcus should not accept the offer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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