Sam's Gourmet Sandwiches, Inc. currently operates 20 sandwich shops located throughout southeastern Wisconsin. Each location...

50.1K

Verified Solution

Question

Accounting

image
Sam's Gourmet Sandwiches, Inc. currently operates 20 sandwich shops located throughout southeastern Wisconsin. Each location operates independently in most aspects, however, when Sam's started operations its management invested in baking ovens which were installed in the larger Waukesha, WI facility. Waukesha produces all the bread used in Sam's locations. The ovens required an initial investment of $300,000. Sam's has been operating at a minimal profit over its last four years. Management has begun to wonder if the decision to make its own bread remains financially responsible. They have obtained a quote from Puffs 'n Stuff, a Madison area bakery, to supply bread at a cost of $2.40/loaf. $ 97,500 This compares with Sam's internal costs of producing bread as follows: . costats. Cost at 75,000 Per Unit units per Year Direct Material Direct Labor $ 18,750 Variable Manufacturing Overhead $41,250 $0.55 Depreciation - ovens $ 90,000 $1.20 Rent - additional Waukesha space $ 30,000 $0.40 Total cost $277,500 $3.70 $0.25 If Sam's decides to purchase its bread from the Madison bakery, the rental of space in Waukesha will continue. There would be no other use for the ovens and no resale value. If Sam's does accept the supplier's quote, by how much will Sam's net operating income change? (NOTE: enter a whole number without dollar signs, decimals, or commas. Enter a minus sign to indicate it is a negative number)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students