Solved

Gottshall Inc

Question 50

Essay

Gottshall Inc.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: Gottshall Inc.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: 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: 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? Why? 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: Gottshall Inc.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: 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: 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? Why? 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? Why?

Correct Answer:

verifed

Verified

Direct materials, direct labor, and vari...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q17: The Melville Corporation produces a single product

Q45: Faustina Chemical Corporation manufactures three chemicals (TX14,

Q47: The constraint at Dreyfus Inc.is an expensive

Q52: Janeiro Skate, Inc.currently manufactures the wheels that

Q96: Paine Corporation processes sugar beets in batches

Q112: A joint product is:<br>A) any product which

Q165: Mcfarlain Corporation is presently making part U98

Q181: The following are Silver Corporation's unit costs

Q223: Fabri Corporation is considering eliminating a department

Q397: Two products, QI and VH, emerge from