Solution-Should outland continue to manufacture the part

Should outland continue to manufacture the part

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Reference no: EM133150037

Question - The Outland Company manufactures 5,000 units of a part that could be purchased from an outside supplier for $16 each. Outland's costs to manufacture each part are as follows:

Direct materials $4

Direct labor 3

Variable manufacturing overhead 6

Fixed manufacturing overhead 10

Total $23

All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses.

Required -

a. Should Outland continue to manufacture the part? Show your calculations.

b. Would your answer change if Outland could lease the manufacturing facilities to another company for $25,000 per year? Show your calculations.

Reference no: EM133150037

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Should outland continue to manufacture the part

Reference no: EM133150037

Reference no: EM133150037

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