Outside supplier has offered to sell company all these

Reference no: EM13598182

Direct materials $15.70
Direct labor 17.50
Variable manuf overhead 4.50
Fixed manuf overhead 14.60
Unit product cost $52.30

Outside supplier has offered to sell company all these parts for $51.90. If they accept the facilities will be used to make more units of a product that adds $219,000 to contribution margin per year. If part were purchased from outside all direct labor cost would be avoided, but $6.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. The fixed mnufacturing overhead cost would be applied to company's remaining products.

Reference no: EM13598182

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