Gottshall Inc

question 50

Essay

Gottshall Inc.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? Why?

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Definitions:

Referent Power

A form of influence based on the leader's personal traits, where followers identify with or want to emulate the leader.

Rational Power

The influence or control over others based on logic, reasoning, and factual evidence, often seen in professional or academic settings.

Charisma Power

The ability to inspire and influence others through personal charm, appeal, or magnetism.

Expert Power

Expert power is the influence one possesses as a result of one's experience, skills, or knowledge, which others see as valuable or necessary.