Evaluating an Outsourcing Decision Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $615,600. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, 50.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 324,000 and annual capacity is 396,000 units. REQUIRED Determine the effect of the following situation on annual profits. A Guatemalan manufacturer has offered a one-year contract to supply ink for the cartridges (including shipping costs) at a cost of $1.25 per unit. If Epson accepts the offer, it will be able to reduce variable manufacturing costs by 50% and rent some of its factory space to another company for $1,980 per month for 12 months. Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would decrease by $ 8,640 * If Epson accepted Guatemalan manufacturing offer. Should Epson accept Guatemalan manufacturing offering?: No⚫
Evaluating an Outsourcing Decision Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $615,600. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, 50.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 324,000 and annual capacity is 396,000 units. REQUIRED Determine the effect of the following situation on annual profits. A Guatemalan manufacturer has offered a one-year contract to supply ink for the cartridges (including shipping costs) at a cost of $1.25 per unit. If Epson accepts the offer, it will be able to reduce variable manufacturing costs by 50% and rent some of its factory space to another company for $1,980 per month for 12 months. Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would decrease by $ 8,640 * If Epson accepted Guatemalan manufacturing offer. Should Epson accept Guatemalan manufacturing offering?: No⚫
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...
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