The abc company manufactures components for use in

Reference no: EM13571499

The ABC Company manufactures components for use in producing one of its finished units. When 12,000 units are produced, the fully absorbed cost per unit is $35 as follows:

Direct Materials $ 5

Direct Labor 15

Variable Overhead 10

Fixed Overhead 5

The Williams Company has offered to sell 12,000 units to ABC for $37 each. If ABC accepts to offer, some of the facilities currently being used to manufacture the components can be rented as warehouse space for $75,000. $2 of the fixed overhead represents supervision which would be transferred to another area of the company and $3 of the fixed overhead per unit would have to be allocated to ABC's other products. Quantify and explain what ABC should do assuming all qualitative issues are satisfied?

Reference no: EM13571499

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