Biz Quiz Answer

With a question from Prof. Kenneth P. Sinclair, we tested your business knowledge in our 2016 issue of Lehigh Business.

THE SOLUTION:

1. Buy Gas Burners Outside

16,000 grills X 2 gas burners each = 32,000 gas burners

32,000 burners X $9.25 each = $296,000

2. Make Gas Burners Inside

Direct materials	$200,000
Direct labor	100,000
Variable overhead	50,000
	$350,000/40,000 burners = $8.75 per burner
	X 32,000 burners	$280,000
Inspection, setup, and material handling
	$100 per batch X 32 batches this year =	$3,200
	($4,000 last year/40 batches last year= $100 per batch)
	(40,000 burners last year/1,000 burners per batch = 40 batches last year)
Machine rent		$8,000
Total		$291,200

3. Decrease in net income, if LEHIGH CORPORATION buys the gas burners outside: $4,800
($296,000 outside cost - $291,200 inside cost)

The random winner of this issue's Biz Quiz is Samantha Femia '15. Congratulations!

Posted on:

Monday, February 13, 2017

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