What is Oat Treats' relevant cost? What does Simmons Cereal's offer cost? If Oat Treats accepts the offer, what will the effect on profit be? Incremental dollar amount = _________ Increase or Decrease

What is Oat Treats' relevant cost? What does Simmons Cereal's offer cost? If Oat Treats accepts the offer, what will the effect on profit be? Incremental dollar amount = _________ Increase or Decrease

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 7MC: What is the cost of direct labor f the conversion costs are $330.000 and manufacturing overhead is...

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Question

Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently:

The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs.

PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345).

What is Oat Treats' relevant cost?
What does Simmons Cereal's offer cost?
If Oat Treats accepts the offer, what will the effect on profit be?
- Incremental dollar amount = _________
- Increase or Decrease? . ___________
- Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes.

Direct material
$14,000
6,000
8,000
Direct labor
Manufacturing overhead
Total
$28,000

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