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Calculate the amount of the increase in company profits

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Reference no: EM133102531

Question - Jump Company currently produces 12,000 units per year of a component part of its products. The cost per unit of this component part is given below:

Direct materials $16

Direct labor $12

Variable overhead $7

Allocated fixed overhead $9

Total $44

An outside supplier has offered to sell Jump Company 12,000 units of this component part for $38 per unit. Accepting the offer will allow Jump Company to devote more resources to the production of a product that is in high demand. This will let Jump Company earn additional contribution margin of $63,000 per year. Calculate the amount of the increase in company profits if Jump Company accepts the outside suppliers offer.

Reference no: EM133102531

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