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dietdrpepper dietdrpepper
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9 months ago

Gottshall Incorporated makes a range of products. The company's predetermined overhead rate is $19 per direct labor-hour, which was calculated using the following budgeted data:

Variable manufacturing overhead$ 225,000
Fixed manufacturing overhead$ 630,000
Direct labor-hours45,000

Component P0 is used in one of the company's products. The unit cost of the component according to the company's cost accounting system is determined as follows:

Direct materials$ 21.00
Direct labor40.80
Manufacturing overhead applied 32.30
Unit product cost$ 94.10

An outside supplier has offered to supply component P0 for $78 each. The outside supplier is known for quality and reliability. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by this decision. Gottshall chronically has idle capacity.

Required:

Is the offer from the outside supplier financially attractive?

Textbook 
Introduction to Managerial Accounting: Brewer Edition: 9e

Introduction to Managerial Accounting: Brewer Edition: 9e


Edition: 9th
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BAGrinderBAGrinder
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dietdrpepper Author
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9 months ago
this is exactly what I needed
Alina01978
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
kobbhy
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2 hours ago
This helped my grade so much Perfect
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