Direct materials 45000 direct manufacturing labor 15000

Reference no: EM13481671

Louder Company manufactures part MNO used in several of its truck models. A total of 10,000 units are produced each year with production costs as follows: Direct materials $ 45,000 Direct manufacturing labor 15,000 Variable support costs 35,000 Fixed support costs 25,000 Total costs $120,000 Louder Company has the option of purchasing part MNO from an outside supplier at $11.20 per unit. If MNO is outsourced, 40% of the fixed costs cannot be immediately converted to other uses. Question 1: What amount of the MNO production costs is avoidable? Question 2: Should the company outsource MNO? Why or why not? Question 3: What other items should the company consider before outsourcing any of the parts it manufactures?

Reference no: EM13481671

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