Short-Run Decision Making Purchase price $6.30 Direct materials $3.30 Direct labor $1.50 Variable overhead $0.75 $5.55 Fixed overhead $1.60 $0.96 $0.64 Total unit cost $7.15 $6.51 Units per year 5,000 Total fixed overhead $8,000 Percent unavoidable FOH 60% Increased purch & rec 850 Impact of purchase -$200.00 increase Per unit -0.04 Adjusted price $6.34
Now using all of the original data, suppose that if Benes accepts Arbor's offer, it must hire additional purchasing and receiving help at $850 per year. If Benes accepts Arbor's offer, the impact on operating income for the year will be a(n) increase by $400?