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At what price would gorga be indifferent to roseland offer

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Question - The Gorga Corporation produces 15,000 units of item QT34 annually at a total cost of $600,000.

Direct materials $60,000

Direct labor 165,000

Manufacturing overhead 375,000

Total $600,000

Manufacturing overhead is 36% variable. The Roseland Corporation has offered to supply all 15,000 units of QT34 per year for $35 per unit. If Gorga accepts the offer, $8 per unit of the fixed overhead would be avoided. In addition, some of Gorga's leased facilities could be vacated, reducing lease payments by $90,000 per year.

Requirements

By how much would Gorga's profits change if 15,000 of part QT34 are purchased from Roseland?

At what price would Gorga be indifferent to Roseland's offer?

Reference no: EM131790301

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