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Case Study: Hood Ltd. currently manufactures Part ABBA which is used in many of its products. It is currently producing 35,000 units of ABBA. The cost per unit to manufacture is currently as detailed below:
Of the total fixed overhead applied to ABBA, $77,000 relates to salaries of supervisory personnel who would be terminated if the company decides to outsource this product. The remaining fixed overhead is allocated based on square footage utilized.
An outside supplier, Jones Inc., has contacted the company and has agreed to supply this part at $11 per unit. They are prepared to sign a long-term contract at $12 per unit.
Question: What are:
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