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Should the company accept the offer

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Question - Company makes 10,000 units per year of a part called a prositron for use in one of its products. Data is below:

Direct materials = $250

Direct labor = 125

Variable manufacturing OH = 50

Fixed manufacturing OH = 150

Total = $575

An outside supplier has offered to sell the company the prositrons it requires. If the company decided to continue making the prositrons, 20% OF THE ABOVE fixed manufacturing overhead costs could be avoided.

Assuming the company has no alternative use for the facilities presently devoted to the production of prositrons. If the outside supplier offers to sell the prositrons for $425 each, should the company accept the offer?

Reference no: EM131641849

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