CourseLover

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Category > Management Posted 21 Dec 2017 My Price 10.00

how much does Guggenbiller’s income change

Guggenbiller Corporation currently makes 200,000 units per year of a gasket for use in one of its

products. The production manager says that the part costs $3.20 per unit to make. This figure comes

from:

Direct materials $0.55

Direct labor 0.20

Variable manufacturing overhead 0.30

Fixed manufacturing overhead 2.15

Total manufacturing cost per unit 3.20

An outside supplier has offered to sell Guggenbiller Corporation all 200,000 gaskets for $1.40 per

unit. If Guggenbiller decides to discontinue making the gaskets and start purchasing them, $100,000

of the total fixed manufacturing overhead costs could be avoided. However, shipping (not included in

the purchase cost, would be $50,000. An additional profit of $30,000 could be earned through use of

the released facilities.

Required: By how much does Guggenbiller’s income change if the outside supplier’s

offer is accepted? Fully support and justify your answer.

Answers

CourseLover
(12)
Status NEW Posted 21 Dec 2017 07:12 AM My Price 10.00

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