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Lakers Company manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows:
Direct materials
$3
Direct labor
$5
Variable factory overhead
$4
Fixed factory overhead
$2
Total costs
$14
The fixed factory overhead costs are unavoidable.
Assume that Lakers Company has been offered 5,000 units of the part from another producer for $14 each. The facilities currently used could be used to make 5,000 units of a product that would contribute $5 a unit to cover fixed expenses.
make the new product and buy the part to earn an extra $3 per unit contribution to profit
make the new product and buy the part to earn an extra $1 per unit contribution to profit
continue to make the part to earn an extra $1 per unit contribution to profit
continue to make the part to earn an extra $3 per unit contribution to profit
Attachment:- MA-Assign3.doc
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