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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: Variable manufacturing overhead Fixed manufacturing overhead Direct labor-hours $225,000 $630,000 45,000 Component PO 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 Direct labor Manufacturing overhead applied Unit product cost 21.00 40.80 32.30 5 94.10 An outside supplier has oftered to supply component PO 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 idie capacity
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