Gottshall Incorporated Makes a Range of Products

question 199

Essay

Gottshall Incorporated makes a range of products. The company's predetermined overhead rate is $19 per direct labor-hour, which was calculated using the following budgeted data:
Component P0 is used in one of the company's products. The unit cost of the component according to the company's cost accounting system is determined as follows:
An outside supplier has offered to supply component P0 for $78 each. The outside supplier is known for quality and reliability. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by this decision. Gottshall chronically has idle capacity.Required:Is the offer from the outside supplier financially attractive?

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Definitions:

Recall

The mental process of retrieval of information from the past.

Essay Questions

Open-ended questions that require respondents to organize and present their thoughts on a particular topic in a clear, structured manner.

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A type of question used in tests and surveys where respondents are asked to connect items in one column with items in another, based on a set of criteria.

Flashbulb Memory

A highly detailed, exceptionally vivid 'snapshot' of a moment or circumstance in which a piece of surprising and consequential (or emotionally arousing) news was heard.