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Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: Direct material Direct labor Manufacturing overhead Total The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). $14,000 6,000 8,000 $28,000 1. What is Oat Treats' relevant cost? 2. What does Simmons Cereal's offer cost? 3. If Oat Treats accepts the offer, what will the effect on profit be? • Incremental dollar amount = o Increase or Decrease? no quotes. . Please note: Your answer is either "Increase" or "Decrease" - capital first letters and

Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: Direct material Direct labor Manufacturing overhead Total The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). $14,000 6,000 8,000 $28,000 1. What is Oat Treats' relevant cost? 2. What does Simmons Cereal's offer cost? 3. If Oat Treats accepts the offer, what will the effect on profit be? • Incremental dollar amount = o Increase or Decrease? no quotes. . Please note: Your answer is either "Increase" or "Decrease" - capital first letters and

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 17E: Product cost method of product costing Smart Stream Inc. uses the product cost method of applying...
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**Oat Treats Manufacturing Cost Analysis** Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: | Expense | Cost | |-----------------------------|------------| | Direct material | $14,000 | | Direct labor | $6,000 | | Manufacturing overhead | $8,000 | | **Total** | **$28,000**| The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. **PLEASE NOTE:** Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). 1. **What is Oat Treats' relevant cost?** `________________` 2. **What does Simmons Cereal's offer cost?** `________________` 3. **If Oat Treats accepts the offer, what will the effect on profit be?** - **Incremental dollar amount** = `________________` . - **Increase or Decrease?** `________________` . _Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes._
Transcribed Image Text:**Oat Treats Manufacturing Cost Analysis** Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: | Expense | Cost | |-----------------------------|------------| | Direct material | $14,000 | | Direct labor | $6,000 | | Manufacturing overhead | $8,000 | | **Total** | **$28,000**| The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. **PLEASE NOTE:** Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). 1. **What is Oat Treats' relevant cost?** `________________` 2. **What does Simmons Cereal's offer cost?** `________________` 3. **If Oat Treats accepts the offer, what will the effect on profit be?** - **Incremental dollar amount** = `________________` . - **Increase or Decrease?** `________________` . _Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes._
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