United Chemical Corporation produces an oil-based chemical product which it sells to paint manufacturers. In 2008, the
Question:
Direct materials.................................................................... $6.00
Direct labor 1 ........................................................................ .20
Variable manufacturing overhead.......................................... .80
Fixed manufacturing overhead ............................................. .60
Total manufacturing costs .................................................... $8.60
The company is considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.70, Direct labor $.60, Variable manufacturing overhead $.50. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $15.00 per gallon.
Instructions
Determine the incremental per gallon increase in net income and the total increase in net income if the company manufactures the paint.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt
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