Reference no: EM133071460
Question - Gyro Gear loose presently manufacturers a switch that is currently used in the production of planes.
The unit costs to make this switch are:
Direct materials $2.50
Direct Labor 3.00
Variable manufacturing overhead 0.50
Fixed manufacturing overhead 4.25
Variable selling and administration costs 1.50
Fixed selling and administration costs 2.00
$13.75
The $13.75 unit cost is based on 8,000 switches produced each year that sell for $15.00 each.
Fixed costs are allocated based on the basis of direct labor hours and are not avoidable.
A special mould will have to be purchased for this specific order at a cost of 12,000
Gearlose is capable of producing 12,000 switches per year.
An outside supplier has approached Gyro Gearlose to purchase 2,000 switches at a price of $12.00 each and this order will not affect regular sales.
Required - ALL CALCULATIONS MUST BE SHOWN
1. Should the company accept the outside suppliers offer?
2. Give two qualitative factors would influence your decision.
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