Problem 1 a Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be? Relevant Costs Materials $0.24 Labor $0.40 Variable Overhead $0.16 Fixed Overhead (30% of $.20) $0.06 - Total Cost (30,000 Rolls Per Year) - Offer by Supplier $0.90 Total Cost (30,000 Rolls Per Year) - Continue Manufaturing $- Purchase from Supplier $- Increase/Decrease in Profit $-

When business has alternative of manufacturing or purchasing, then total costs of both the…

Answered: Problem 1 a Reuben’s Deli…

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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Problem 1 a
Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are:








A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be?

Relevant Costs
Materials	$0.24
Labor	$0.40
Variable Overhead	$0.16
Fixed Overhead (30% of $.20)	$0.06
	-

Total Cost (30,000 Rolls Per Year)	-

Offer by Supplier	$0.90
Total Cost (30,000 Rolls Per Year)	-

Continue Manufaturing	$-
Purchase from Supplier	$-
Increase/Decrease in Profit	$-

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