Problem 5. Mama Kacina, Inc. makes the best pies in the world. Her piesare so popular that they are shipped all over the island. For 40firm has made its own crusts along with the delicious filling that goes in.Using an ABC system that Mama's nephew, who has an MBA,implemented, the cost of the crusts is:years,theDM$.25DL.50ОН.75$1.50Total CostThe ABC system contains three cost pools. Costs are almost entirely fixedin all three cost pools.Recently, a new supplier has been established by a local entrepreneur.The new firm has offered to make all the pie crusts Mama needs for $.80each. Mama would save $.70 per pie.Currently, Mama makes 1,500 pies per month. Her nephew tells her thather firm is operating at capacity. He suggests that buying the pies from thenew supplier would allow them to increase the number of pies they sell bymonth. He says that would increase the firm's contribution marginby $500 per month. Mama doesn't know what a contribution margin is, butshe thinks doing things herself the way she always has is the best idea.100per1. What would be the impact on net income of buying the pie crustsfrom the new supplier and producing more pies? You may assumethat any pies Mama makes can be sold.

the net income of pie mama would be increased by 1,470 per month. change in net income=Profit from…

Answered: What would be the impact on net income…

What would be the impact on net income of buying the pie crusts from the new supplier and producing more pies? You may assume any pies Mama makes can be sold. that

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 5CE: Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each...

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