At Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using the extra worker, the company will be able to engrave 8,000 more units per year. The selling price per unit is $16. The cost per unit currently is $11.85 as shown: (Refer to attached image) What is the annual financial impact of hiring the extra worker for the bottleneck process?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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At Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using the extra worker, the company will be able to engrave 8,000 more units per year. The selling price per unit is $16. The cost per unit currently is $11.85 as shown: (Refer to attached image)

What is the annual financial impact of hiring the extra worker for the bottleneck process?

Direct material
$ 4.50
Direct labor
2.10
Variable overhead
1.45
Fixed overhead (primarily depreciation of equipment)
3.80
Total
$11.85
Transcribed Image Text:Direct material $ 4.50 Direct labor 2.10 Variable overhead 1.45 Fixed overhead (primarily depreciation of equipment) 3.80 Total $11.85
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