A Company Is Deciding Where to Assign Its Summer Intern

question 98

Essay

A company is deciding where to assign its summer intern. The manager estimates that the intern can save the company $10,000 in supply chain costs. What increase in sales (revenue) by the intern is required to show an equal profit?
$$\begin{array} { | l | l | l | l | } \hline & \begin{array} { l } \text { Supply Chain } \\\text { costs }\end{array} & \begin{array} { l } \text { Variable Costs } \\\text { (materials) }\end{array} & \text { Profits } \\\hline \% \text { of current sales } & & & \\\text { (revenue) } & 35 & 25 & 40 \\\hline\end{array}$$

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Definitions:

Cost Of Production Report

A document detailing the total cost associated with the production of goods over a specific period, including materials, labor, and overhead.

Conversion Cost

The combined cost of labor and manufacturing overheads spent on converting raw materials into finished goods.

Direct Materials

Basic substances that can be directly linked to the manufacture of a particular product or service.

Equivalent Units

A concept used in cost accounting to convert units of production into an amount of completed units, facilitating the calculation of costs per unit.