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The Enhanced Products Division of Evergreen Industries makes ceramic pots that are used to hold large decorative plants. The normal selling price for these pots is $70 each. During 2012, the division produced 10,000 pots and incurred the following costs:
Unit-level materials cost per unit $15
Unit-level labor cost per unit $20
Unit-level overhead cost per unit $16
Other manufacturing overhead total **$36,000 * If the equipment is not used to produce ceramic pots, it can be leased for $8,000 per year. **Includes supervisors' salaries and rent for the plant where the pots are made.
Required:
Suppose the division has the opportunity to purchase the ceramic pot from another manufacturer for $60. The supplier is willing to hold sufficient inventories to meet Evergreen's demand. Should the division outsource its ceramic pots? Why or why not?
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