Idle equipment that could be used to manufacture headlights

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Reference no: EM13792615

Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Peluso's plant manager is considering making the headlights now being purchased from an outside supplier for $21 each. The Peluso plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headlight requires $6.50 of direct materials, $8 of direct labor, and $9.75 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Peluso Company to manufacture the headlights should result in a net gain (loss) for each headlight of (Do not round your intermediate calculations):

$6.45

$2.60

$(3.25)

$0.65

Reference no: EM13792615

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