Question

Bramble Corp. incurs the following costs to produce 9300 units of a subcomponent: Direct materials $7812 Direct labor 10509 Variable overhead 11718 Fixed overhead 16200 An outside supplier has offered to sell Bramble the subcomponent for $2.85 a unit. If Bramble could avoid $3000 of fixed overhead by accepting the offer, net income would increase (decrease) by $(2052). $6534. $534. $(5697).

Answer 1

Answer:

$6534

Explanation:

Calculation for how much the net income would increase or (decrease)

First step is to calculate Total Costs to Make

Direct materials $7,812

Direct labor 10,509

Variable overhead 11,718

Avoidable Fixed 3,000

Total Costs to Make 33,039

Second step is to calculate the Total Costs to Buy

Costs to Buy= $2.85 * 9,300 units

Costs to Buy= $26,505

Last step is to calculate Net Income Increase or Decrease using this formula

Net Income Increase or Decrease = Costs to Make – Costs to Buy

Net Income Increase or Decrease =$ 33,039 -$26,505

Net Income Increase or Decrease = $6534

Therefore how much the net income would increase or (decrease) will be $6534