ONE At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: Direct material Direct labor Variable overhead Fixed overhead (primarily depreciation of equipment) Total Required: $5.50 3.10 2.45 4.80 $15.85 1. What is the annual financial impact of hiring the extra worker for the bottleneck process? Show your calculations, and explain as needed. 2. What additional factors should Stardust consider before making the decision to hire the extra worker?

ONE At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: Direct material Direct labor Variable overhead Fixed overhead (primarily depreciation of equipment) Total Required: $5.50 3.10 2.45 4.80 $15.85 1. What is the annual financial impact of hiring the extra worker for the bottleneck process? Show your calculations, and explain as needed. 2. What additional factors should Stardust consider before making the decision to hire the extra worker?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

What additional factors should Stardust consider before making the decision to hire the extra worker?

ONE
At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The
company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the
problem.
Using the extra worker, the company will be able to produce and sell 9,000 more units per year.
The selling price per unit is $20. The cost per unit currently is $15.85 as shown:
Direct material
Direct labor
Variable overhead
Fixed overhead (primarily depreciation of equipment)
Total
Required:
$ 5.50
3.10
2.45
4.80
$15.85
1. What is the annual financial impact of hiring the extra worker for the bottleneck process?
Show your calculations, and explain as needed.
2. What additional factors should Stardust consider before making the decision to hire the
extra worker?

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