Question

Bramble Corp. incurs the following costs to produce 13000 units of a subcomponent: Direct materials $10920 Direct labor 14690 Variable overhead 16380 Fixed overhead 16200 An outside supplier has offered to sell Bramble the subcomponent for $2.85 a unit. If Bramble accepts the offer, by how much will net income increase (decrease)

Answer 1

$4,850

Step-by-step explanation:

The computation is shown below:

Total cost when the production is 13,000 units

Direct materials $10,920

Direct labor $14,690

Variable overhead $16,380

Total $41,900

And, the other case

Their new cost on supplier offer is

= $2.85 × 13,000 units

= $37,050

In the case when the order is accepted So the net income would increased by

= $41,900 - $37,050

= $4,850