Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 28,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: Materials $0.23 per roll Labor 0.40 per roll Variable overhead 0.16 per roll Fixed overhead 0.20 per roll A potential supplier has offered to sell Reuben the rolls for $0.89 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what wll the effect on profit be? Reuben would see a $ in profit if he buys the rolls.
Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 28,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: Materials $0.23 per roll Labor 0.40 per roll Variable overhead 0.16 per roll Fixed overhead 0.20 per roll A potential supplier has offered to sell Reuben the rolls for $0.89 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what wll the effect on profit be? Reuben would see a $ in profit if he buys the rolls.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 28,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are:
Materials
$0.23 per roll
Labor
0.40 per roll
Variable overhead
0.16 per roll
Fixed overhead
0.20 per roll
A potential supplier has offered to sell Reuben the rolls for $0.89 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?
Reuben would see a $
in profit if he buys the rolls.
Transcribed Image Text:Artisan, Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be
$54,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $26.00 and the
cost per unit is $7.75.
Direct materials
$3.50
Direct labor
1.10
Variable overhead
0.45
Fixed overhead (primarily depreciation of equipment)
2.70
Total
$7.75
Using the information provided, calculate the annual financial impact of hiring the extra worker.
Profit $
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