Rough N' Tough (RNT) manufactures outdoors accessories. Management is considering producing the poles for their tents rather than continuing to purchase from their current supplier. The supplier charges $60 per set of poles. The cost accounting team has estimated that RNT would incur the following costs if they were to produce the poles instead: $40 per set for direct materials, $10 per set for direct labor, $7 per set for variable overhead, and $20 per set for fixed overhead application. RNT currently has unused production capacity and manufacturing equipment that could be used to manufacture the poles. RNT has planned to sell 5,000 tents this year. What would the change in overall cost be for the company if RNT produced the poles rather than purchasing them?
Rough N' Tough (RNT) manufactures outdoors accessories. Management is considering producing the poles for their tents rather than continuing to purchase from their current supplier. The supplier charges $60 per set of poles. The cost accounting team has estimated that RNT would incur the following costs if they were to produce the poles instead: $40 per set for direct materials, $10 per set for direct labor, $7 per set for variable overhead, and $20 per set for fixed overhead application. RNT currently has unused production capacity and manufacturing equipment that could be used to manufacture the poles. RNT has planned to sell 5,000 tents this year. What would the change in overall cost be for the company if RNT produced the poles rather than purchasing them?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rough N' Tough (RNT) manufactures outdoors accessories. Management is considering producing the poles for their tents rather than continuing to purchase from their current supplier. The supplier charges $60 per set of poles.
The cost accounting team has estimated that RNT would incur the following costs if they were to produce the poles instead: $40 per set for direct materials, $10 per set for direct labor, $7 per set for variable
RNT currently has unused production capacity and manufacturing equipment that could be used to manufacture the poles. RNT has planned to sell 5,000 tents this year.
What would the change in overall cost be for the company if RNT produced the poles rather than purchasing them?
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