Question
Russell Company currently manufactures glass turntable trays (carousels) for its main product, microwave ovens. The costs for one turntable is as follows: Direct materials $
Russell Company currently manufactures glass turntable trays (carousels) for its main product, microwave ovens. The costs for one turntable is as follows:
Direct materials | $ 3.00 |
Direct labor | $ 18.00 |
Variable overhead | $ 6.00 |
Average fixed overhead | $ 30.00 |
Total production cost | $ 57.00 |
Stover Corp., a maker of glass cooking pans, has contacted Russell with an offer to outsource 3,000 turntables for $52.00 each. Russell would eliminate $66,000 of fixed overhead if it accepts the proposal and buys the turntables from Stover. Should Russell make or buy the turntables? What is the dollar impact on Russell's profits?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started