At RM Sharpton Corporation, the engraving department is a bottleneck, and the company is considering hiring an extra worker, whose salary will be $45,000 per year, to mitigate the problem.
With the extra worker, the company will be able to produce and sell 7,000 more units per year. The selling price per unit is $12. Cost per unit currently is $7 as follows:
Direct material..................$2.50
Direct labor...................$75
Variable overhead ..............................$25
Fixed overhead (primarily depreciation of equipment)...$3.50
Total......................$7.00
Required:
Calculate the annual financial impact of hiring the extra worker.