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Sarah makes cookies. She normally produces 10,000 cookies a month and incurs the following costs: direct material $0.05 per cookie, direct labor $0.01 per
Sarah makes cookies. She normally produces 10,000 cookies a month and incurs the following costs: direct material $0.05 per cookie, direct labor $0.01 per cookie, variable overhead $0.08 per cookie, and fixed overhead of $3,000. Thus, the average total cost per cookie is $0.44. A supplier has offered to produce her cookies for her for $0.30 each. Sarah thinks $1,000 of her fixed overhead can be avoided if she accepts the offer. [ADDITIONAL INFORMATION]: Sarah thinks she could use her facilities to make biscuits instead of cookies if she accepts the supplier's offer. In this scenario, she anticipates selling 3,000 biscuits for $1 each, incurring $0.20 of variable cost, and no longer avoidign the $1,000 fixed osts. How much will Sarah's income change (positive number for increase, negative for decrease, and don't se dollar signs) if she accepts the offer and produces biscuits?
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