Glenn Company makes 40,000 motors to be used in the production of its power lawn mowers.The cost per motor at this level of activity is as follows:
direct materials .............. $12.00
direct labor .................. 9.25
variable overhead ............. 5.60
fixed overhead ................ 4.00
total ......................... $30.85
The motor has recently become available from an outside supplier for $29 per motor. IfGlenn purchases the motor from the outside supplier, the space that is currently beingused to manufacture the motor can be rented out for $30,000 per year.Assume that 40% of the fixed overhead costs will be eliminated if the motor is purchasedfrom the outside supplier.
Calculate the increase in company profits if Glenn Company accepts the outside suppliers offer. Do not use decimals in your answer or type the word increase after your answer