Problem 1 a Reuben’s Deli currently makes rolls for deli sandwiches it produces

Problem 1 a Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be? Relevant Costs Materials $0.24 Labor $0.40 Variable Overhead $0.16 Fixed Overhead (30% of $.20) $0.06 – Total Cost (30,000 Rolls Per Year) – Offer by Supplier $0.90 Total Cost (30,000 Rolls Per Year) – Continue Manufaturing $- Purchase from Supplier $- Increase/Decrease in Profit $-

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