Justine Corporation currently makes rolls for deli sandwiches it produces. It uses 40,000 rolls annually...
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Accounting
Justine Corporation currently makes rolls for deli sandwiches it produces. It uses 40,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are given below:
Materials $0.24 per roll
Labor $0.40 per roll
Variable overhead $0.16 per roll
Fixed overhead $0.20 per roll
A potential supplier has offered to sell Justine the rolls for $0.95 each. If the rolls are purchased, 20% of the fixed overhead could be avoided. If Justine accepts the offer, what will the effect on profit be?
A
$4,400 increase in profit
B
$1,200 increase in profit
C
$3,300 increase in profit
D
$3,300 decrease in profit
E
$4,400 decrease in profit
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