Kweschun company makes one of its components

Reference no: EM131094918

Kweschun Company makes one of its components at a cost of $13.18 per unit at its current production level of 80,000 units per month. This component is used in the manufacture of several other products which are sold to customers. Operating capacity in the production area is 100,000 units per month. Production costs break down as follows: Direct Material $4.25/unit; Direct Labor $4.80/unit; Variable overhead costs $2.65/unit; Fixed overhead costs $118,400. Approximately 30% of the fixed costs are directly associated with production and the remainder are allocated. A supplier of several other components has offered to deliver 80,000 units/month at a cost to Kweschun of $12.00/unit. Based on the information given, should Kweschun continue to manufacture the component or accept the supplier's offer? What other information should you seek out before making a final decision on this offer?

Reference no: EM131094918

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