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What would be the impact on net income of buying the pie crusts from the new supplier and producing more pies? You may assume any pies Mama makes can be sold. that

What would be the impact on net income of buying the pie crusts from the new supplier and producing more pies? You may assume any pies Mama makes can be sold. that

FINANCIAL ACCOUNTING
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 5. Mama Kacina, Inc. makes the best pies in the world. Her pies are so popular that they are shipped all over the island. For 40 firm has made its own crusts along with the delicious filling that goes in. Using an ABC system that Mama's nephew, who has an MBA, implemented, the cost of the crusts is: years, the DM $.25 DL .50 ОН .75 $1.50 Total Cost The ABC system contains three cost pools. Costs are almost entirely fixed in all three cost pools. Recently, a new supplier has been established by a local entrepreneur. The new firm has offered to make all the pie crusts Mama needs for $.80 each. Mama would save $.70 per pie. Currently, Mama makes 1,500 pies per month. Her nephew tells her that her firm is operating at capacity. He suggests that buying the pies from the new supplier would allow them to increase the number of pies they sell by month. He says that would increase the firm's contribution margin by $500 per month. Mama doesn't know what a contribution margin is, but she thinks doing things herself the way she always has is the best idea. 100 per 1. What would be the impact on net income of buying the pie crusts from the new supplier and producing more pies? You may assume that any pies Mama makes can be sold.
Transcribed Image Text:Problem 5. Mama Kacina, Inc. makes the best pies in the world. Her pies are so popular that they are shipped all over the island. For 40 firm has made its own crusts along with the delicious filling that goes in. Using an ABC system that Mama's nephew, who has an MBA, implemented, the cost of the crusts is: years, the DM $.25 DL .50 ОН .75 $1.50 Total Cost The ABC system contains three cost pools. Costs are almost entirely fixed in all three cost pools. Recently, a new supplier has been established by a local entrepreneur. The new firm has offered to make all the pie crusts Mama needs for $.80 each. Mama would save $.70 per pie. Currently, Mama makes 1,500 pies per month. Her nephew tells her that her firm is operating at capacity. He suggests that buying the pies from the new supplier would allow them to increase the number of pies they sell by month. He says that would increase the firm's contribution margin by $500 per month. Mama doesn't know what a contribution margin is, but she thinks doing things herself the way she always has is the best idea. 100 per 1. What would be the impact on net income of buying the pie crusts from the new supplier and producing more pies? You may assume that any pies Mama makes can be sold.
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