Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private firms on the adoption and use of cost management systems. Government Division consults with state and local governments. Government Division has a client that is interested in implementing an activity-based costing system in its public works department. The division’s head approached the head of Corporate Division about using one of its associates. Corporate Division charges clients $600 per hour for associate services, the same rate other consulting companies charge. The Government Division head complained that it could hire its own associate at an estimated variable cost of $200 per hour, which is what Corporate pays its associates. Required: a. What is the minimum transfer price that Corporate Division should obtain for its services, assuming that it is operating at capacity? b. What is the maximum price that Government Division should pay? c-1. Is there any change in minimum transfer price as referred in part (a), if Corporate Division had idle capacity? c-2. Is there any change in maximum transfer price as referred in part (b), if Corporate Division had idle capacity?

Answers

Answer 1

Answer: See explanation

Explanation:

a. What is the minimum transfer price that Corporate Division should obtain for its services, assuming that it is operating at capacity?

The minimum transfer price that should be obtained by Corporate Division for its services would be the market price for the services which will be:

= $600

b. What is the maximum price that Government Division should pay?

The maximum price that the government division should pay would be the estimated variable cost which will be:

= $200 per hour.

c. 1. Is there any change in minimum transfer price as referred in part (a), if Corporate Division had idle capacity? c-2. Is there any change in maximum transfer price as referred in part (b), if Corporate Division had idle capacity?

In a scenario whereby the Corporate Division had idle capacity, then part (a) would be $200 per hour and then (b) won't be effected.


Related Questions

State the meaning of managerial economics, its characteristics, and the contribution of economic theory for Managerial Economics?

Answers

Answer:

Explanation:

Managerial Economics like its name suggests, is a culmination of both economics theory and managerial theory. It deals with the applying of some economic theories, tools, and or even methodologies in order to solve practical problems in a business. A lot of the times, these business decisions do not only affect daily decisions, it also extends to, and affects the economic power. Some characteristics include it being;

Pragmatic.

It also makes use of the theory of firm.

It uses the help of macroeconomics.

Aiming to render any form of help to the management.

And lastly, it is also a scientific art.

arrugia Corporation produces two intermediate products, A and B, from a common input. Intermediate product A can be further processed into Product X. Intermediate product B can be further processed into Product Y. The common input is purchased in batches that cost $90 each and the cost of processing a batch to produce intermediate products A and B is $36. Intermediate product A can be sold as is for $53 or processed further for $33 to make Product X that is sold for $80. Intermediate product B can be sold as is for $113 or processed further for $66 to make Product Y that is sold for $160. Required: a. Assuming that no other costs are involved in processing the common input or in selling products, what is the profit (loss) from processing one batch of the common input into the products X and Y

Answers

Answer:

if the firm processes A and B into X and Y, it will lose $25

Explanation:

total costs of producing product A and B = $90 (common input) + $36 (processing) = $126

selling price of A and B = $53 + $113 = $166

profit of selling A and B = $166 - $126 = $40

if A and B are processed further, the cost of X and Y = $126 + $33 + $66 = $225

selling price of X and Y = $80 + $160 = $240

profit of selling X and Y = $240 - $225 = $15

if the firm processes A and B into X and Y, it will lose $40 - $15 = $25

Supervisor: "He is going to rue missing today's training session." Why would he need to make up for missing today's training session? Why would he be mad about missing today's training session? Why would he regret missing today's training session? Why would he love missing today's training session? Why would he try missing today's training session?

Answers

Answer:

He would need to make up for missing today's training session because it is going to be a very important session that will help him a lot to improve his skills.

He would be mad about missing it because he would lose that valuable opportunity to improve his skills, as well as because he would have to make up for missing it.

He would regret missing the session for the same reason.

He tried missing today's session because he had other things on mind, more pressing tasks, the session is valuable but boring, etc.

The reason he would regret missing today's training session since it will be a crucial session that will greatly assist him in improving his talents.

What are training sessions?

Training programs are seen as an important aspect of human resource development. It's a well-organized instrument for bringing certain abilities up to the target level using knowledge, training, coaching, and practice.

Thus, The reason he regret missing today's training session is the right as the training program is significant for him.

Learn more about training sessions here:

https://brainly.com/question/880788

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000.The fair value of Float Is net assets was $1,850,000, and the book value was $1,500,000.The non controlling interest shares of Float Corp. are not actively traded. What is the total amount of goodwill recognized at the date of acquisition

Answers

Answer:

150,000

Explanation:

Answer:

$150,000

Explanation:

Calculation for the total amount of goodwill recognized at the date of acquisition

First step is to calculate the Cost(PP)

Cost(PP) =$1,600,000/.8

Cost(PP)= $2,000,000

Second step is to calculate the goodwill

to be recognized

Goodwill=$2,000,000- $1,850,000

Goodwill= 150,000

Therefore the total amount of goodwill recognized at the date of acquisition is $150,000

The manufacturing overhead budget at Rosco Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2500 direct labor-hours will be required in January. The variable overhead rate is $5 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,010 per month, which includes depreciation of $3750. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Answers

Answer:

the  cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $51,760

Explanation:

The computation of the cash disbursements for manufacturing overhead is as follows

= company's budgeted fixed manufacturing overhead - depreciation + variable manufacturing overhead

= 2,500 direct labor hours × $5 - $3,750 + $43,010

= $12,500 + $39,260

= $51,760

Hence, the  cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $51,760

The increase in unemployment that occurs during recessions and depressions is called Group of answer choices normal unemployment. cyclical unemployment. frictional unemployment. structural unemployment.

Answers

Answer:

cyclical unemployment.

Explanation:

Unemployment rate refers to the percentage of the total labor force in an economy, who are unemployed but seeking to be gainfully employed. The unemployment rate is divided into various types, these include;

I. Cyclical unemployment rate (CU).

II. Frictional unemployment rate (FU).

III. Structural unemployment rate (SU).

IV. Actual unemployment rate (AU).

V. Natural Rate of Unemployment (NU).

A cyclical unemployment can be defined as a type of unemployment which is typically related to changes in the business, economy or industry cycle such as recession, governmental policies etc.

Mathematically, cyclical unemployment rate can be calculated using the formula;

[tex]Cyclical \; unemployment \; rate \; (CU) = Actual \; unemployment \; rate \; (AU) - Natural \;unemployment \; rate \; (NU)[/tex]

Hence, the increase in unemployment that occurs during recessions and depressions is called cyclical unemployment

On December 31, 2019, Krug Company prepared adjusting entries that included the following items: Depreciation expense: $36,000; Accrued sales revenue: $34,000; Accrued expenses: $18,000; Used insurance: $8,000; the insurance was initially recorded as prepaid. Rent revenue earned: $6,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. If Krug Company reported total liabilities of $140,000 prior to adjusting entries, how much are Krug's total liabilities after the adjusting entries

Answers

Answer:

$152,000

Explanation:

Calculation for How much was Krug's total liabilities after the adjusting entries

Reported total liabilities $140,000

Add Accrued expenses $18,000

Less Rent revenue earned ($6,000)

Total liabilities $152,000

($140,000+$18,000-$6,000)

Therefore the amount of Krug's total liabilities after the adjusting entries will be $152,000

Marigold Corporation's December 31, 2020 balance sheet showed the following: 6% preferred stock, $20 par value, cumulative, 40000 shares authorized; 21000 shares issued $ 420000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding 20000000 Paid-in capital in excess of par value - preferred stock 69000 Paid-in capital in excess of par value - common stock 27500000 Retained earnings 9050000 Treasury stock (30,000 shares) 704000 Marigold's total paid-in capital was

Answers

Answer: $‭47,989,000‬

Explanation:

Total Paid-in capital = Preferred stock + Paid-in capital in excess of par value - preferred stock + Common stock +  Paid-in capital in excess of par value - common stock

= 420,000 + 69,000 + 20,000,000 + 27,500,000

= $‭47,989,000‬

Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers?

Answers

Answer:

The amount of the $1 tax that is paid by sellers is $0.40.

Explanation:

The amount of tax paid by the sellers can be calculated using the following 2 steps:

Step 1: Calculation of the tax burden of the seller

This can be calculated using the following formula:

Tax burden of the seller = Elasticity of demand / (Elasticity of demand + Elasticity of supply) ............... (1)

Where;

Tax burden of the seller = ?

Elasticity of demand = 2

Elasticity of supply = 3

Substituting the values into equation (1), we have:

Tax burden of the seller = 2 / (2 + 3) = 2 / 5 = 0.40, or 40%

Step 2: Calculation of the amount of the $1 tax that is paid by sellers

This can be calculated using the following formula:

Tax paid by the sellers = Tax amount * Tax burden of the seller .................. (2)

Where;

Tax amount = $1

Tax burden of the seller = 40%

Substituting the values into equation (2), we have:

Tax paid by the sellers = $1 * 40% = $0.40

Therefore, the amount of the $1 tax that is paid by sellers is $0.40.

Additional note:

The answer above clearly demonstrates what obtains in economics that when supply is more elastic than demand, sellers will bear less of the tax burden, and when demand is more elastic than supply, sellers will bear more of the tax burden.

From the question, the fact that the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value) indicates that supply is more elastic than demand. This makes the sellers to bear only 40% of the tax burden while the buyers bear the remaining 60%.

Service firms generally include which of the following as product or job costs: _________

a. Utilities
b. Direct labor wages
c. Supervisor salaries
d. Service firms do not track job costs

Answers

Answer: Direct labor wages

Explanation:

Answer:

B.) Direct Labor Wages

Explanation:

The service firms track the costs of that services that they provide. Thats why service firms generally include Direct labor Wages as a product or job costs

Hope this helped a little!

Assume that a company uses a standard cost system and applies overhead to production based on direct labor-hours. It provided the following information for its most recent year: Total budgeted fixed overhead cost for the year $ 300,000 Actual fixed overhead cost for the year $ 276,000 Budgeted direct labor-hours 60,000 Actual direct labor-hours 56,000 Standard direct labor-hours allowed for the actual output 57,800 What is the fixed overhead applied to production during the period

Answers

Answer:

$289,000

Explanation:

Predetermined overhead rate (Fixed) = Budgeted Fixed overhead cost / Budgeted hours

Predetermined overhead rate (Fixed) = 300,000/60,000

Predetermined overhead rate (Fixed) = $5 per hours

Applied Fixed overhead = Standard hours allowed × Predetermined overhead rate(fixed)

Applied Fixed overhead = 57,800 * $5 per hours

Applied Fixed overhead = $289,000

So, the fixed overhead applied to production during the period is $289,000

Short notes on foods for bee​

Answers

Answer:

The answer to this question varies depending on what their role is in the hive. For example, many worker bees eat the same exact foods such as honey, pollen, and nectar. However, the elusive queen bees (less common in a hive) are typically fed a different diet while growing up to change their overall larval development.

Answer:

This is about honey bees

Nectar is the main source of carbohydrates for honey bees. Therefore we have to plant flowers to ensure a well rounded diet all times of the year.

NOTE that: Honey is still the best thing to feed your bees however you can also give them

Sugar Syrup

Pam exchanges a rental building, which has an adjusted basis of $36,000 and a tractor whose fmv was 25,000 for investment land which has a fair market value of $55,000. Pam basis in the tractor was 32,000. What is Pam’s basis of the investment land?

Answers

Answer:

$36,000

Explanation:

Based on the information given we were told that he exchanges a rental building that has an adjusted basis of the amount of $36,000 which means that Pam’s basis of the investment land will be the Adjusted basis of the amount $36,000.

Therefore Pam’s basis of the investment land will be $36,000

During 2022, Pharoah Company reported cash provided by operations of $985000, cash used in investing of $851000, and cash used in financing of $236000. In addition, cash spent on fixed assets during the period was $342000. Average current liabilities were $806000 and average total liabilities were $2128000. No dividends were paid. Based on this information, what was Pharoah free cash flow

Answers

Answer:

$643,000

Explanation:

Calculation for Pharoah free cash flow

Using this formula

Free Cash flow =Cash provided by operations -Cash spent on fixed assets

Let plug in the formula

Free cash flow=$985000-$342000

Free cash flow=$643,000

Therefore Pharoah free cash flow will be $643,000

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, the price of a three-month call option with an exercise price of $100 is $10, and a put with the same expiration date and exercise price costs $7.What would be a simple options strategy to exploit your conviction about the stock price?

Answers

Answer:

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Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows: Product Total Cost Total Net Realizable Value 101 $ 154,000 $ 117,000 102 111,000 127,000 103 77,000 67,000 104 47,000 67,000 Required: 1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products. 2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

Answers

Answer:

Tatum Company

1. The carrying value of inventory at December 31, 2021 is:

$342,000

2. Adjusting Journal Entry:

Debit Inventory write-downs $47,000

Credit Inventory $47,000

To record the write-down of inventory value to LCNRV.

Explanation:

a) Data and Calculations:

Product   Total Cost        Total Net Reali-   LCNRV        Write-downs

                                          zable Value

101           $ 154,000          $ 117,000          $ 117,000        $ 37,000

102               111,000            127,000              111,000            0

103               77,000             67,000              67,000            10,000

104              47,000              67,000              47,000            0

Total      $ 389,000        $ 378,000        $ 342,000        $ 47,000

You are the manager of a bank. You need to decide whether to approve a 10-year loan application from a 25 year old student to finance her MBA. The loan will yield a loss of $250 per year to the bank for the duration of the loan. After 10 years, the student will likely buy other products and therefore she will yield a profit of $500 per year until she is 65. After age 65, she will yield a profit of $1,000 per year until she is 85, when she will stop being a customer. The likelihood that she stops being a customer after she repays her MBA loan is 2% each year. The discount rate that the bank uses is 7% per year.
Would you approve the loan? Please explain with numerical support.

Answers

Answer and Explanation:

The computation is shown below:

Present value of loss  because of giving the loan to her is

= PVAF (7%, 10 years) × $250

= 7.02358 × $250

= $1,755.9

Now

The Present value of gain after repayment of the loan is

Till age of 65

($500, age 35 years to 65 years i.e. 30 years) is

=  [PVAF (7%, 40 years) - PVAF (7%, 10 years)] × 0.98 (probability of failure) × $500

= (13.3317 - 7.02358) × 0.98 × $500

= $3,090.98 (A)

Till age of 85

($1000, age 65 years to 85 years i.e. 20 years)

=  [PVAF (7%, 60 years) - PVAF (7%, 40 years)] × 0.98 (probability of failure) × $1,000

= (14.03918 - 13.3317) × 0.98 × $1,000

= $693.33 (B)

Now

Expected inflow from the student post repayment of the loan is

= (A) + (B)

= $3,784.31

Now expected net gain is

= $3,784.31 - $1,755.9

= $2,028.41

Here we exclude the period from 25 to 35 years and at later from 25 years to 65 years

Holiday Trees Inc. is an unlevered (all-equity) firm that expects to generate an after-tax cash flow stream of $250 million next year and is expected to grow at a rate of 4% per year. The beta of the unlevered value of this free cash flow stream is 1.5. The riskless rate of interest is 6%, and the risk premium on the market portfolio is 7%. The corporate tax rate is 40%. Assume all debt is riskless. 1. What is the value of unlevered firm?2. The firm decides to lever itself to a 50% debt-to-equity ratio. Calculate WACC.3. Calculate value of the levered firm.

Answers

Answer and Explanation:

The computation is shown below:

1. Cost of equity = Risk free Rate + Beta × Market Risk Premium

= 6% + 1.5 × 7%

= 16.5%

Now Value of un Levered firm is

= After tax Cash flow year1 ÷ (Cost of Equity - Growth)

= $250 ÷ (16.5% - 4%)

= $2000

Beta levered  is

= Beta Unlevered (1+ (1- Tax Rate ) × Debt  ÷ Equity)

= 1.5  × (1 + (1  -40%) × 50% ÷ 100%

= 1.95

2.  Cost of equity = Risk free Rate + Beta × Market Risk Premium

= 6% + 1.95 × 7%

= 19.65%

Now WACC = Weight of Equity ×  Cost of Equity + Weight of debt × Cost of Debt × (1 - Tax rate)

=100% ÷ 150% × 19.65% + 50% ÷ 150% × 6% × (1 - 40%)

= 14.30%

3. Debt = 1 ÷ 3 × 2000

Value of levered firm = Value Unlevered + Debt × Tax Rate

= 2000 + 2000 ÷ 3 × 40%

= $2,266.67

Sensitivity analysis measures: Group of answer choices Changes in the depreciation tax shield over the life of the project Changes in production levels with changes in revenues Changes in taxes payable with changes in a stock's current price changes in the retention rate with changes in net income Changes in fixed costs with changes in the operating cash flow None of the above

Answers

Answer:

None of the above

Explanation:

A sensitivity analysis measures how under a certain set of assumptions, different values of an independent variable influence the dependent variable. It is also known as what if analysis and it is based on various assumptions. Options given in the question like changes in depreciation tax shield over a project's life, changes in production levels with the changes in revenue etc. are absolutely certain to an extent, or in other words, bound to happen.

Impa Inc. applies overhead based upon machine hours. At the beginning of 2018, Impa estimated overhead to be $400,000, machine hours to be 25,000, and direct labor hours to be 40,000. During April, Impa has 3,000 direct labor hours and 4,500 machine hours. What is the amount of overhead applied for April?

Answers

Solution :

It is given that,

Impa Inc. estimated an overhead of $ 400,00 machine hours to be 25,000 and that of direct labor hours of 40,000.

During the month of April, Impa Inc. has a 3000 direct labor hours as well as 4500 machine hours.

Therefore, the overhead applied for the month of April is

[tex]$\frac{400,000}{25,000} $[/tex]  machine hours = $ 16 per machine hour

The actual machine hours in April = 4500 machine hours

Therefore the overhead applied = 4500 x 16

                                                      = $ 72,000

Based on the following data for the current year, determine the accounts receivable turnover. Net sales on account during the year $550,000 Cost of merchandise sold during the year $350,000 Accounts receivable, beginning of year $35,000 Accounts receivable, end of year $25,000 Inventory, beginning of year $80,000 Inventory, end of year $125,000

Answers

Answer:

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A company used straight-line depreciation for an item of equipment that cost $16,950, had a salvage value of $4,200, and had a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,860 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:

Answers

Answer:

Annual depreciation= $2,480

Explanation:

Giving the following information:

Total Purchase price= $16,950

Useful life= 5 years

Residual value= $4,200

First, we need to calculate the accumulated depreciation at the end of year 3.

Annual depreciation= (Total Purchase price - salvage value)/estimated life (years)

Annual depreciation= (16,950 - 4,200) / 5

Annual depreciation= $2,550

Accumulated depreciation= 2,550*3= $7,650

Now, we can calculate the new depreciation expense:

Depreciable value= 16,950 - 7,650= $9,300

Useful life= 3 years

Salvage value= $1,860

Annual depreciation= (9,300 - 1,860) / 3

Annual depreciation= $2,480

Irrespective of whether a firm produces or shuts down in the short run, fixed cost is equal to its _____

a. average variable cost.
b. total cost.
c. sunk cost.
d. total revenue.
e. marginal cost.

Answers

Answer:

c. sunk cost.

Explanation:

Because in short run, fixed cost doesn't changes with output, that is whether we produce or not, we have to pay for it, so it is considered as Sunk cost. Also like Sunk cost, we don't make decisions with fixed costs.

Total assets $800,000 $1,000,000Net sales 720,000 650,000Gross profit 352,000 320,000Net income 108,000 117,000Weighted average number of common shares outstanding 90,000 90,000Market price of common $42 $39The return on assets for 2022 is

Answers

Answer:

$5000

Explanation:

Which skills are common to Education and Training cluster? skills in math and finance leadership and teaching skills knowledge of instructional design and psychology knowledge of school policies maintenance of classroom discipline communication skills for dealing with students, families, and coworkers

Answers

Answer:

Leadership and teaching skillsKnowledge of instructional design and psychologyKnowledge of school policiesMaintenance of classroom discipline Communication skills for dealing with students, families, and coworkers

Explanation:

The Education and Training cluster comprises teachers, administrators, and professional student support staff. They work in schools and other educational institutions. Professional in the cluster help students achieve their educations objectives by helping them in academics and providing psycho-social support.

The skills required in this cluster revolve around effective teaching, school administration, and the ability to create good working relationships with students, colleagues, and other stakeholders.

Answer:

The correct answer is A,B,C,E,F

Explanation:

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By addressing customer complaints as quickly as possible, even in the middle of a model year, is demonstrating ____.

a. assurance
b. empathy
c. responsiveness
d. serviceability
e. tangibles

Answers

Answer:

c. responsiveness

Explanation:

When customer's complains are quickly attended to as and when required, this is the demonstration of a quality known as responsiveness. Responsiveness is the ability to attend to requests on time when the occasion demands.

It shows and gives an assurance to customers that their request or complaints would be attended to through the channel. Thus, majority of them would prefer to use the channel instead of visiting one of the offices of the company.

Company A decided to expand its office space and purchased 20 new desks and chairs from a supplier on July 1st. The desks and chairs were purchased on credit, and the company had 60 days to pay for them. Company A paid for the desks and chairs on August 15th. How would the transaction on August 15th impact the accounting equation of Company A

Answers

Answer:

The July 1st purchase increased assets (furniture) and liabilities (accounts payable).

The August 15th payment decreases assets (cash) and decreases liabilities (accounts payable is gone)

Explanation:

The important thing about a balance sheet or the accounting equation is that they must balance. If the total numbers on both sides are not the same, then you did something wrong. If assets increase, liabilities or equity must increase also, and vice versa.

vanhoe Company reported the following results for the year ended December 31, 2021, its first year of operations: 2021 Income (per books before income taxes)$1510000 Taxable income 2700000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2022. What should Ivanhoe record as a net deferred tax asset or liability for the year ended December 31, 2021, assuming that the enacted tax rates in effect are 30% in 2021 and 25% in 2022

Answers

Answer:

the deferred tax liability for the year ended is $297,500

Explanation:

The computation of the net deferred tax or liability is as follows:

= (Taxable income - income before income taxes) × enacted tax rate

= ($2,700,000 - $1,510,000) × 0.25

= $1,190,000 × 0.25

= $297,500

Therefore the deferred tax liability for the year ended is $297,500

Hence, the same is to be considered

The value of a p value. In a critical commentary on the use of significance testing, Lambdin (2012) explained, "If a p < .05 result is ‘significant,’ then a p = .067 result is not ‘marginally significant’" (p. 76). Explain what the author is referring to in terms of the two decisions that a researcher can make.

Answers

Answer:

The author is referring to the acceptance or rejection of the null hypothesis because of significance testing.

Explanation:

In significance testing, if the result is statistically significant with p < 0.05, the conclusion is that it is not probably caused by chance.   Since statistical significance indicates a strong evidence against the null hypothesis, the null hypothesis is rejected by the researcher, and the alternative hypothesis is accepted.  But, if the p = 0.67, the result is said to be not marginally significant, and the null hypothesis is not rejected.  These two conclusions mean that the researcher's rejection or acceptance of a null hypothesis is decided by a thin margin, and this is why wrong conclusions can be made at times.

Bramble Corp. incurs the following costs to produce 9300 units of a subcomponent: Direct materials $7812 Direct labor 10509 Variable overhead 11718 Fixed overhead 16200 An outside supplier has offered to sell Bramble the subcomponent for $2.85 a unit. If Bramble could avoid $3000 of fixed overhead by accepting the offer, net income would increase (decrease) by $(2052). $6534. $534. $(5697).

Answers

Answer:

$6534

Explanation:

Calculation for how much the net income would increase or (decrease)

First step is to calculate Total Costs to Make

Direct materials $7,812

Direct labor 10,509

Variable overhead 11,718

Avoidable Fixed 3,000

Total Costs to Make 33,039

Second step is to calculate the Total Costs to Buy

Costs to Buy= $2.85 * 9,300 units

Costs to Buy= $26,505

Last step is to calculate Net Income Increase or Decrease using this formula

Net Income Increase or Decrease = Costs to Make – Costs to Buy

Net Income Increase or Decrease =$ 33,039 -$26,505

Net Income Increase or Decrease = $6534

Therefore how much the net income would increase or (decrease) will be $6534

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